Verizon West Virginia, Inc. v. West Virginia Bureau of Employment Programs
| Decision Date | 09 July 2003 |
| Docket Number | No. 30899.,No. 30901.,No. 30900.,30899.,30900.,30901. |
| Citation | 586 S.E.2d 170,214 W. Va. 95 |
| Court | West Virginia Supreme Court |
| Parties | Verizon West Virginia, Inc., et al., Eastern Associated Coal Corporation v. West Virginia Bureau of Employment Programs, Workers' Compensation Division. Verizon West Virginia, Inc., et al., Weirton Steel Corporation v. West Virginia Bureau of Employment Programs, Workers' Compensation Division. Verizon West Virginia, Inc., et al., Pine Ridge Coal Company v. West Virginia Bureau of Employment Programs, Workers' Compensation Division. |
In this proceeding three employers, who are self-insured for workers' compensation purposes, appealed an order of the circuit court obligating them to share the burden of retiring a six billion dollar debt1 that was caused by the State's failure to maintain a Second Injury Reserve Fund from 1947 to 1997. The majority opinion has disingenuously brushed aside the federal constitutional rights of the employers2 and affirmed the circuit court's decision. For the reasons set out below, I dissent.
In 1947, the State sought to encourage employers to hire workers that had preexisting injuries. The "carrot" used by the State to encourage employment of injured workers was the creation of the Second Injury Reserve Fund (hereinafter "Second Injury Fund"). See Acts 1947, Ch. 164, codified at W. Va. Code § 23-3-1. "The basic intent of the [Second Injury Fund] is to encourage the hiring of the handicapped by not charging an employer for preexisting disabilities[.]" McClanahan v. Workmen's Comp. Comm'r, 158 W. Va. 161, 163-64, 207 S.E.2d 184, 186 (1974). The legislature deemed this encouragement to be necessary because workers with preexisting injuries were more susceptible to sustaining other injuries that could collectively result in permanent total disability. See W. Va. Code § 23-3-1(d)(1) (1995) (Repl. Vol. 2002) ().
The Acts of 1947 set out a definite and express method for funding the Second Injury Fund. Pursuant to that method,
[a] portion of all premiums that shall be paid into the workers' compensation fund by subscribers not electing to carry their own risk . . ., shall be set aside to create and maintain a surplus fund to cover . . . the second injury hazard, and all losses not otherwise specifically provided for in this chapter.
W. Va. Code § 23-3-1(b) (emphasis added). The record in this case conclusively established that, from 1947 to 1997, the State failed to set aside monies from the Workers' Compensation Fund, as required by W. Va. Code § 23-3-1(b), and place such monies in the Second Injury Fund. As a result of such failure, the Second Injury Fund has an estimated six billion dollar deficit.
In 1997 the State, through its agents the Division of Workers' Compensation and the Performance Council, devised a plan to pay off the six billion dollar Second Injury Fund debt. Under that plan, called Resolution No. 11, self-insured employers were held responsible for helping to pay the Second Injury Fund debt. The State dragged self-insured employers into this deficit under the guise of paying increased "administrative" expenses.
The three self-insured employers in this appeal, Eastern Associated Coal, Pine Ridge Coal Company and Weirton Steel Corporation, challenged the State's authority to force them to help retire a debt that was created by the State's failure to comply with the law in funding the Second Injury Fund beginning in 1947.3 The three employers argued at the administrative level, in circuit court, and before this Court, that from 1947 to 1997 "administrative" expenses had never been defined to include payment of the Second Injury Fund deficit. See Smith v. State Workmen's Comp. Comm'r, 159 W. Va. 108, 116, 219 S.E.2d 361, 366 (1975) .
The majority opinion has found that, although for fifty years "administrative" expenses for self-insureds did not include payment of the Second Injury Fund deficit, the federal constitution did not prohibit the State from redefining the term to force self-insureds into helping pay a six billion dollar debt that they had no role in creating.
Weirton Steel argued in its reply brief that enforcement of Resolution No. 11 violated the Contract Clause of the federal constitution. The majority opinion, without explanation, totally failed to address this issue. This Court has no rule that precludes addressing the merits of an issue properly raised in a reply brief.4 In fact, we have previously granted relief based solely upon issues raised in a reply brief. See State ex rel. West Virginia Highlands Conservancy, Inc. v. West Virginia Div. of Envtl. Prot., 191 W. Va. 719, 720 n.1, 447 S.E.2d 920, 921 n.1 (1994) (). See also State ex rel. West Virginia Highlands Conservancy, Inc. v. West Virginia Div. of Envtl. Prot., 193 W. Va. 650, 653, 458 S.E.2d 88, 91 (1995) (). Consequently, I will address the Contract Clause issue, even though the majority opinion incorrectly failed to do so.
Under Article I, section 10, clause 1 of the United States Constitution, "[n]o State shall . . . pass any . . . Law impairing the Obligation of Contracts[.]"5 This Court has noted that "the [C]ontract [C]lause prohibits the passage of a statute or law which impairs the obligation of an existing contract." Collins v. City of Bridgeport, 206 W. Va. 467, 475, 525 S.E.2d 658, 666 (1999). "[T]he Contract Clause has been interpreted to apply to legislative impairments of `public' contracts, or contracts to which the state or its agent is a party." National Educ. Ass'n-Rhode Island by Scigulinsky v. Retirement Bd. of Rhode Island Employees' Ret. Sys., 890 F. Supp. 1143, 1151 (D.R.I. 1995). It has been observed that "the United States Supreme Court has been adamant in holding that `impairments of a State's own contracts w[ill] face more stringent examination under the Contract Clause than would laws regulating contractual relationships between private parties.'" State ex rel. West Virginia Reg'l Jail & Corr. Facility Auth. v. West Virginia Inv. Mgmt. Bd., 203 W. Va. 413, 424, 508 S.E.2d 130, 141 (1998) (Davis, C.J., dissenting) (quoting Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244 n.15, 98 S. Ct. 2716, 2722 n.15, 57 L. Ed. 2d 727 (1978)). See also Nieves v. Hess Oil Virgin Islands Corp., 819 F.2d 1237, 1249 (3d Cir. 1987) ().
A three-part test is used in analyzing an alleged Contract Clause violation. First, a court must determine whether the challenged law operates "as a substantial impairment of a contractual relationship." Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 244, 98 S. Ct. 2716, 2722, 57 L. Ed. 2d 727 (1978) (footnote omitted). Second, if the impairment is substantial, the court must determine whether there is "a significant and legitimate public purpose behind the [challenged law.]" Energy Reserves Group, Inc. v Kansas Power & Light Co., 459 U.S. 400, 411, 103 S. Ct. 697, 704, 74 L. Ed. 2d 569 (1983). Third, if a legitimate public purpose is demonstrated, the court must determine whether the adjustment of "the rights and responsibilities of contracting parties [is based] upon reasonable conditions and [is] of a character appropriate to the public purpose justifying [the challenged law's] adoption." United States Trust Co. v. New Jersey, 431 U.S. 1, 22, 97 S. Ct. 1505, 1518, 52 L. Ed. 2d 92 (1977).6 Utilizing this test, I will demonstrate that the use of Resolution No. 11 to retroactively impose a six billion dollar Second Injury Fund deficit on the self-insured employers in this case violates the Contract Clause.
The first step in a Contract Clause analysis is establishing a substantial impairment of a pre-existing contract. Ascertaining the existence of a substantial impairment of a pre-existing contract also involves a three part test: "whether there is a contractual relationship, whether a change in law impairs that contractual relationship, and whether the impairment is substantial." General Motors Corp. v. Romein, 503 U.S. 181 186, 112 S. Ct. 1105, 1109, 117 L. Ed. 2d 328 (1992). See also Renaud v. Wyoming Dep't of Family Services, 203 F.3d 723, 728 (10th Cir. 2000). I will address each of these factors separately.
1. Contractual Relationship. It has correctly been held that "[a] statutory enactment is generally presumed not to create `contractual or vested rights but merely declares a policy to be pursued until the legislature shall ordain otherwise.'" Koster v. City of Davenport, 183 F.3d 762, 766 (8th Cir. 1999) (quoting National R.R. Passenger Corp. v. Atchison, Topeka & Santa Fe Ry., 470 U.S. 451, 465-66, 105 S. Ct. 1441, 1451, 84 L. Ed. 2d 432 (1985)).7 However, "[i]f the language of the statute expressly indicates that the statute is being enacted to form a contract, a determination that the state is party to a binding obligation is clear." National Educ. Ass'n-Rhode Island by Scigulinsky v. Retirement Bd. of Rhode Island Employees' Ret. Sys., 890 F....
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