Tedford v. Workforce Safety and Ins., 20060320.

• Decision Date: 27 August 2007
• Docket Number: No. 20060320.,20060320.
• Citation: 738 N.W.2d 29,2007 ND 142
• Parties: Richard TEDFORD, Claimant and Appellee, v. WORKFORCE SAFETY AND INSURANCE, Appellant, and Red Owl Stores, Respondent.
• Court: North Dakota Supreme Court

738 N.W.2d 29

2007 ND 142

Richard TEDFORD, Claimant and Appellee, v. WORKFORCE SAFETY AND INSURANCE, Appellant, and Red Owl Stores, Respondent.

No. 20060320.

Supreme Court of North Dakota.

August 27, 2007.

Mark G. Schneider, Schneider & Schneider, Fargo, N.D., for claimant and appellee.

Jacqueline Sue Anderson, Special Assistant Attorney General, Fargo, N.D., for appellant.

VANDE WALLE, Chief Justice.

[¶ 1] Workforce Safety and Insurance ("WSI") appealed from an amended judgment reversing WSI's decision to offset Richard Tedford's federal social security retirement benefits against his workers compensation disability benefits and from an order awarding Tedford attorney fees and costs under N.D.C.C. § 28-32-50. Tedford has moved for attorney fees and costs on appeal under the same statute. We affirm the amended judgment, concluding WSI erred in offsetting Tedford's social security retirement benefits against his workers compensation disability benefits. We reverse the order awarding Tedford attorney fees and costs, concluding the district court erred in determining WSI acted without substantial justification, and we deny Tedford's motion for attorney fees and costs on appeal.

I

[¶ 2] Tedford injured his back at work in 1985 and applied for workers compensation benefits. WSI accepted the claim and awarded medical expenses and disability benefits. Although Tedford was able to work for a period of time after the injury, he has not worked since April 1989. Tedford began receiving temporary total disability benefits in April 1989. In June 1990, WSI determined Tedford was permanently and totally disabled and began paying permanent total disability benefits. The monthly amount of the permanent benefits was the same as the prior temporary benefits, and Tedford has continuously received total disability benefits, either temporary or permanent, since April 1989.

[¶ 3] Tedford also began receiving federal social security disability benefits ("SSDI") in 1989. WSI offset the amount of his SSDI against his temporary total disability benefits as required under N.D.C.C. § 65-05-09.1. When his disability status was changed to permanent in June 1990, WSI continued to offset Tedford's SSDI against his disability payments. In August 2003, Tedford reached his full retirement age of 65 years and 2 months, and his SSDI benefits were automatically converted to social security retirement benefits in the same monthly amount as his prior SSDI benefits.

[¶ 4] After Tedford's social security benefits converted from SSDI to retirement benefits, WSI issued an order to offset the retirement benefits against his permanent total disability benefits. Tedford requested reconsideration of WSI's order to offset his social security retirement benefits, and an administrative law judge ("ALJ") recommended reversal of WSI's order offsetting retirement benefits. WSI rejected the ALJ's recommended findings of fact, conclusions of law, and order, and issued a final order directing that Tedford's social security retirement benefits be offset against his permanent total disability benefits.

[¶ 5] Tedford appealed to the district court. The district court initially determined WSI had not erred in offsetting Tedford's federal retirement benefits against his workers compensation disability benefits, and judgment was entered affirming WSI's final order. Tedford moved to amend the judgment, and his motion was heard and considered by a different district court judge. The second judge concluded WSI was not entitled to offset Tedford's retirement benefits, and an amended judgment was entered reversing WSI's final order and directing that Tedford receive full total disability benefits, without reduction for any offset, effective August 1, 2003.

[¶ 6] Tedford subsequently moved for attorney fees and costs under N.D.C.C. § 28-32-50. The district court determined that WSI's legal arguments in the administrative and judicial proceedings were not substantially justified, and awarded Tedford attorney fees and costs.

II

[¶ 7] On appeal under N.D.C.C. § 28-32-49, we review the decision of the administrative agency in the same manner as does the district court under N.D.C.C. § 28-32-46. Zander v. Workforce Safety & Ins., 2003 ND 194, ¶ 6, 672 N.W.2d 668. There are no disputed issues of fact on the merits in this case, and only questions of law are presented. When an appeal presents only questions of law, under N.D.C.C. §§ 28-32-46 and 28-32-49 this Court must affirm the agency order unless it is not in accordance with the law. See Wanstrom v. North Dakota Workers Comp. Bureau, 2000 ND 17, ¶ 4, 604 N.W.2d 860. Questions of law are fully reviewable on appeal from an administrative decision. Genter v. Workforce Safety & Ins. Fund, 2006 ND 237, ¶ 12, 724 N.W.2d 132.

III

[¶ 8] WSI contends it did not err in offsetting Tedford's social security retirement benefits against his workers compensation disability benefits.

[¶ 9] There is no dispute that, when Tedford was determined to be totally disabled in April 1989, WSI was authorized by statute to offset his SSDI benefits against his workers compensation disability benefits. See N.D.C.C. § 65-05-09.1. At that time, however, there was no authority for WSI to offset social security retirement benefits against disability benefits.

[¶ 10] The 1989 legislature enacted N.D.C.C. § 65-05-09.2, which authorized an offset of social security retirement benefits for injured employees who received permanent total disability benefits. 1989 N.D. Sess. Laws ch. 770, § 4. The statute provided that "[t]he provisions of this section are effective for workers who retire on or after July 1, 1989." N.D.C.C. § 65-05-09.2 (1989 version).

[¶ 11] This Court considered application of the retirement offset statute to an injured worker who was totally disabled and receiving benefits prior to July 1, 1989, but whose federal SSDI benefits were converted to retirement benefits after that date, in Kallhoff v. North Dakota Workers' Comp. Bureau, 484 N.W.2d 510 (N.D.1992). Kallhoff had been injured in 1983 and was receiving workers compensation disability benefits and SSDI. WSI was offsetting his SSDI benefits against his disability benefits. Kallhoff turned 65 in January 1990, and his SSDI benefits were automatically converted to social security retirement benefits. WSI then began offsetting Kallhoff's retirement benefits against his disability benefits, and Kallhoff challenged WSI's application of the retirement offset statute to him.

[¶ 12] This Court held that WSI could not apply N.D.C.C. § 65-05-09.2 to offset retirement benefits against Kallhoff's workers compensation disability benefits, stressing that claimants receiving total disability benefits had a reliance interest in receiving unreduced retirement benefits as they had anticipated:

The Bureau wants us to interpret the statute to interfere with Kallhoff's expectation that his benefits would continue as he had anticipated. Kallhoff makes no claim that his benefits are vested, only that he and others similarly situated have relied on receiving unreduced retirement benefits. We agree that offsetting his post-July, 1989 social security benefits would impact on his expectation, something the legislative history suggests the legislature wanted to avoid. Without a clearer statutory expression by the legislature, we refuse to apply the statute to Kallhoff, who was "already in the fund" before July 1, 1989.

Because the legislature was concerned with protecting the reliance interest of claimants and because the legislature did not clearly express an intent to adversely affect disabled workers who qualified for benefits before July 1, 1989, and because disabled workers are not subject to the ordinary prerequisite of voluntariness in deciding when they "retire," we conclude that NDCC § 65-05-09.2 applies only to workers who qualified for workers' compensation disability benefits, and turned sixty-five, on or after July 1, 1989.

Kallhoff, 484 N.W.2d at 514.

[¶ 13] Subsequently, the 1993 legislature amended N.D.C.C. § 65-05-09.2.1993 N.D. Sess. Laws ch. 614, § 10. The amended statute provided for an offset of social security retirement benefits against the benefits of certain totally disabled claimants, but provided that a claimant who had been receiving benefits offset by SSDI benefits would continue to receive at least the same aggregate amount:

This section applies to an employee who becomes entitled to and receives social security retirement benefits after June 30, 1989, or who receives social security retirement benefits that have been converted from social security disability benefits by the social security administration after June 30, 1989. A conversion by the bureau from offsetting an employee's social security disability benefits to offsetting an employee's social security retirement benefits under this section may not result in a decrease in the aggregate amount of benefits the employee receives from both sources.

N.D.C.C. § 65-05-09.2 (1993 version). The legislature also, in 1995, enacted N.D.C.C. § 65-05-09.3(2), which created a presumption that a disabled employee who became eligible for social security retirement benefits was considered to be retired and no longer eligible for workers compensation disability benefits. 1995 N.D. Sess. Laws ch. 623, § 1; see Gregory v. North Dakota Workers Comp. Bureau, 1998 ND 94, ¶ 19, 578 N.W.2d 101.

[¶ 14] This Court considered application of the retirement presumption statute to an employee who was totally disabled prior to its enactment in Gregory. Gregory had been injured in 1958, but returned to work until 1981. In 1985 WSI determined he was permanently and totally disabled and he began receiving disability benefits accordingly. In 1996, Gregory reached age 65 and became eligible for social security retirement benefits. WSI applied N.D.C.C. § 65-05-09.3(2) and discontinued Gregory's disability benefits. Gregory, 1998 ND 94, ¶ 3, 578...