West Virginia Chiropractic Soc., Inc. v. Merritt

• Decision Date: 29 May 1987
• Docket Number: No. 17266,17266
• Parties: W. VA. CHIROPRACTIC SOCIETY, INC., et al. v. Mary Martha MERRITT, Commissioner, etc.
• Court: West Virginia Supreme Court

Page 432

358 S.E.2d 432

178 W.Va. 173

W. VA. CHIROPRACTIC SOCIETY, INC., et al. v. Mary Martha MERRITT, Commissioner, etc.

No. 17266.

Supreme Court of Appeals of West Virginia.

May 29, 1987.

Syllabus by the Court

1. The label attached to an administrative action is not determinative as to whether the action taken constitutes an administrative rule falling within the rule-making requirements of the Administrative Procedures Act, W.Va.Code, 29A-1-1, et seq.

2. One of the basic purposes of the Administrative Procedures Act, W.Va.Code, 29A-1-1, et seq., is to provide an opportunity for public participation in the rule-making process.

3. A schedule established by the Workers' Compensation Commissioner under W.Va.Code, 23-4-3, which fixes maximum reasonable amounts payable to health care providers and determines the type and amount of medical services reasonably required, is a rule subject to the rule-making requirements of the Administrative Procedures Act, W.Va.Code, 29A-1-1, et seq.

4. The general authorization contained in W.Va.Code, 23-4-3, to promulgate a schedule of reasonable medical fees cannot be construed as an express exemption from the requirements of the Administrative Procedures Act, W.Va.Code, 29A-1-1, et seq.

Gerald R. Stowers and Thomas E. Scarr, Bowles, McDavid, Graff & Love, Charleston, for appellants.

Charles G. Brown, Atty. Gen., and Robert D. Pollitt, Asst. Atty. Gen., for appellee.

MILLER, Justice:

The Workers' Compensation Commissioner (Commissioner) appeals an order of the Circuit Court of Kanawha County holding that she failed to comply with the Administrative Procedures Act, W.Va.Code, 29A-1-1, et seq. (APA), in promulgating what is denominated a "POLICY STATEMENT" and "CHIROPRACTIC FEE AND UTILIZATION SCHEDULE" (Schedule). This Schedule, among other things, limits the maximum charges payable for various chiropractic treatments. ¹ The Commissioner contends the Schedule does not constitute a "rule" subject to the rule-making requirements of the APA. An additional reason advanced is that the legislature by enacting W.Va.Code, 23-4-3, ² which authorizes the issuance of the Schedule, meant to specifically exempt this particular grant of rule-making authority from the procedural requirements of the APA. We disagree, and we affirm the circuit court.

There is no dispute that the Commissioner did not follow the rule-making requirements of Article 3 of the APA, such as filing a notice of the proposed action, including the text of the proposed rule and a fiscal note in the State Register. ³ There is likewise no dispute that a State agency ⁴ covered by the APA must comply with its requirements when acting in a rule-making capacity, and that rules not promulgated in accordance with its requirements are invalid and unenforceable. ⁵

The Commissioner's position is that establishing a "schedule" pursuant to W.Va.Code, 23-4-3, is not tantamount to implementing a "rule" within the meaning of the APA, and thus she had no duty to adhere to its procedural requisites. The Commissioner contends that the legislature intended to afford her substantial discretion and flexibility in establishing a schedule of maximum reasonable amounts to be paid to medical providers, as reflected by the language in W.Va.Code, 23-4-3, which empowers the Commissioner to "alter [the schedule] from time to time as he [or she] may determine to be appropriate."

In addition, the Commissioner maintains that the 1986 amendment to W.Va.Code, 23-4-3, which is contained in note 2, supra, bolsters her position that the legislature never intended to subject her power to establish a maximum medical fee schedule to the substantial time constraints imposed by the APA. The 1986 amendment requires the Commissioner to submit the schedule, with any changes thereto, to the legislature on the first day of the legislative session and on such additional occasions as the Commissioner may deem it appropriate.

The Commissioner relies on our per curiam decision in Conner v. Civil Service Comm'n, 175 W.Va. 127, 331 S.E.2d 858 (1985). There, an attorney who had successfully represented a discharged civil service employee challenged the adequacy of his attorney's fee award in the Circuit Court of Kanawha County. The Civil Service Commission had awarded some $6,200 in attorney's fees based upon a fee schedule it had previously established. The circuit court awarded additional attorney's fees by increasing the hourly rate above that provided by the fee schedule. We decided that the circuit court had erred in departing from the attorney's fee schedule and by way of dictum stated that "the fee schedule as set by the CSC is not such [a] rule as is contemplated by the Administrative Procedures Act." 175 W.Va. at 129, 331 S.E.2d at 860.

Conner did not make any extensive discussion of this point and cited only Haines v. Workmen's Compensation Comm'r, 151 W.Va. 152, 150 S.E.2d 883 (1966). The decisive point in Haines was that an unwritten policy being applied by the Workers' Compensation Fund was invalid because it conflicted with the plain meaning of a statute which specified the percentage of permanent disability awardable for certain enumerated injuries. In reversing the Appeal Board on this basis, the Court stated that "any policy adopted and applied by the commissioner must conform to law." 151 W.Va. at 157, 150 S.E.2d at 886. See Ney v. State Workmen's Compensation Comm'r, 175 W.Va. 13, 297 S.E.2d 212 (1982).

In the present case, we deal with more than a fee schedule. The Schedule regulates the number of visits and contains a medical review procedure, see note 1, supra. Courts are in general agreement that the label attached to an administrative action is not determinative as to whether the action taken constitutes an administrative rule falling within the rule-making requirements of the APA. E.g, Columbia Broadcasting System v. United States, 316 U.S. 407, 62 S.Ct. 1194, 86 L.Ed.2d 1563 (1942); Associated Dry Goods Corp. v. E.E.O.C., 720 F.2d 804 (4th Cir.1983); Cheshire Convalescent Center v. Comm'n on Hospitals, 34 Conn.Supp. 225, 386 A.2d 264 (1977); Board of Education v. Cooperman, 209 N.J.Super. 174, 507 A.2d 253 (1986); United Consumers Club, Inc. v. Attorney Gen., 75 Ill.Dec. 35, 119 Ill.App.3d 701, 456 N.E.2d 856 (1983).

The legislature amended the APA in 1982, following our decision in State ex rel. Barker v. Manchin, 167 W.Va. 155, 279 S.E.2d 622 (1981), where we invalidated the provisions of the APA which permitted a legislative committee to veto rules and regulations otherwise validly promulgated by administrative agencies. The 1982 amendments, as noted in A. Neely, Administrative Law in West Virginia (1982), retained the existing definition of a "rule" in W.Va.Code, 29A-1-1, and added "detailed definitions of three basic varieties of rules, in addition to the general definition." A. Neely, supra at 27 (1983 Supp.). These three types of rules are: (1) legislative rules, (2) interpretive rules or statements of policy, and (3) procedural rules.

To determine whether the Schedule in this case constitutes a rule and what type of rule, we look to the definitions set out in W.Va.Code, 29A-1-2. It would appear that the Commissioner's Schedule is one of "general application and future effect ... affecting private rights, privileges or interests," which is one of the definitions of a rule found in W.Va.Code, 29A-1-2(i) (1982). ⁶ It involves a public policy issue having obvious economic significance to chiropractors, to the Workers' Compensation Fund, and to all employers, regular subscribers and self-insurers alike, covered by the workers' compensation law. It would likewise undoubtedly affect the extent of chiropractic treatment available to injured workers in this State covered by the compensation law. Furthermore, the Schedule "makes specific" the meaning of the phrase "maximum reasonable amounts to be paid" contained in W.Va.Code, 23-4-3. ⁷

It seems apparent that upon authorization of the legislature, the Schedule would have the "force of law" and would be determinative of an issue "affecting private rights" as these terms are used in W.Va.Code, 29A-1-2(d). ⁸ The Supreme Court of Rhode Island in Lerner v. Gill, 463 A.2d 1352, 1358 (R.I.1983), recently stated:

"To determine whether a rule is to be classified as legislative or interpretive, one must consider the power assigned to the administrative agency. If a statute expressly delegates power to interpret and define certain legislation to an agency, regulations promulgated pursuant to that power are legislative rules having the force of law. Batterton v. Francis, 432 U.S. 416, 97 S.Ct. 2399, 53 L.Ed.2d 448 (1977)."

Furthermore, the Schedule does not fall within any statutory exception to the definitions of a "rule" or "legislative rule," such as an administrative action relating solely to the internal management of an agency. ⁹ See, e.g., Rossie v. State Dept. of Revenue, 133 Wis.2d 341, 395 N.W.2d 801 (Wis.App.1986) (administrative directive prohibiting smoking in areas controlled by the agency).

Courts from other jurisdictions which have considered cases with analogous facts under administrative procedures acts similar to ours have found that such schedules must be promulgated under their acts. In Division of Workers' Compensation Dept. of Labor & Employment Sec. v. McKee, 413 So.2d 805 (Fla.App.1982), a proposed agency rule relating to physical therapists' fees was declared invalid on a threshold issue because no economic impact statement had been filed as required by the state's administrative procedures act.

In another workers' compensation case, K-Mart Corp. v. State Industrial Ins. System, 101 Nev. 12, 693 P.2d 562 (1985), the agency had followed a mathematical formula for computing increased assessments under a statute which had increased death and disability benefits payable to claimants. In determining the amount of increased assessments against self-insurers,...