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NO. COA04-7
NORTH CAROLINA COURT OF APPEALS
Filed: 21 December 2004
SANDRA O. WILKERSON,
Ancillary Administratrix
of the ESTATE OF JOHNNIE
ALAN WILKERSON and
SANDRA O. WILKERSON,
Individually,
Plaintiffs,
v. Durham County
No. 99 CVS 619
NORFOLK SOUTHERN RAILWAY
COMPANY,
Defendant
Appeal by Unnamed Party from an order entered 15 April 2003 by Judge J.B. Allen, Jr. in Durham County Superior Court. Heard in the Court of Appeals 22 September 2004.
The
Law Offices of William Frank Maready, P.L.L.C., by William F. Maready and
George D. Humphrey, for plaintiff-appellee Sandra O. Wilkerson, et. al.
Millberg,
Gordon & Stewart, P.L.L.C., by John Millberg, for defendant Norfolk
Southern Railway Co.
Cranfill,
Sumner & Hartzog, L.L.P., by Edward C. LeCarpentier, III and F. Marshall
Wall, for unnamed defendant-appellant workers’ compensation carrier Liberty
Mutual Insurance Co.
ELMORE,
Judge.
This
appeal is by the unnamed defendant insurance carrier alleging that the Durham
County Superior Court did not have jurisdiction to enter an order eliminating
the carrier’s workers’ compensation lien; erred in determining that a
settlement had been reached in the underlying case; and lacked jurisdiction to
order that workers’ compensation payments continue until exhausted. For the
reasons stated herein, we vacate the order of the trial court.
This
appeal is rooted in the fatal accident of plaintiff’s husband. Johnnie Alan
Wilkerson, decedent, was transporting cement for his employer, Giant Cement of
South Boston, Virginia (Giant), when he was struck by an Amtrak train while
crossing the tracks on Plum Street in Durham, North Carolina. Since decedent
was a resident of Virginia, and acting within the scope of his employment at
the time of the accident, his wife, the administratrix of his estate, filed for
workers’ compensation benefits under the Workers’ Compensation Act of the
Commonwealth of Virginia. She also filed suit in Durham County Superior Court
against Norfolk Southern Railway Company (Norfolk) alleging that the company
was negligent in maintaining the rail crossing at Plum Street.
As
the workers’ compensation insurance carrier for Giant, Liberty Mutual (Liberty)
began making payments consistent with Virginia’s workers’ compensation laws.
Pursuant to Virginia statutory and case law entitling a carrier to
reimbursement for payments, Liberty filed and maintained a lien against any
proceeds from a recovery in plaintiff’s action against Norfolk. Plaintiff
tentatively accepted a mediated settlement from Norfolk for $400,000.00 subject
to a satisfactory resolution of Liberty’s lien on those funds. Essentially
plaintiff wanted to maximize the amount of recovery from the settlement flowing
directly to her and have as few dollars as possible paid to Liberty via the
reimbursement lien. As such, plaintiff filed a motion in Durham County Superior
Court to have the lien either reduced or eliminated. The trial court determined
that it had proper jurisdiction to handle the matter and entered an order
eliminating the lien. It is from this order that Liberty appeals.
Liberty
argues that the “settlement” entered into by Norfolk and plaintiff is not final
and does not constitute a settlement for the purposes of N.C. Gen. Stat.
§97-10.2(j). We agree, and therefore vacate the trial court’s order eliminating
the lien.
N.C.
Gen. Stat. §97-10.2(j) (2003) provides in part that:
Notwithstanding
any other subsection in this section, . . . in the event that a settlement has
been agreed upon by the employee and the third party, either party may apply to
the resident superior court judge of the county in which the cause of action
arose, where the injured employee resides or the presiding judge before whom
the cause of action is pending, to determine the subrogation amount. After
notice to the employer and the insurance carrier, after an opportunity to be
heard by all interested parties, and with or without the consent of the
employer, the judge shall determine, in his discretion, the amount, if any, of
the employer’s lien, whether based on accrued or prospective workers’
compensation benefits, and the amount of cost of the third-party litigation to
be shared between the employee and employer.
Id. Liberty cites Ales v. T.A. Loving Co., 163 N.C.
App. 350, 593 S.E.2d 453 (2004), in support of its position. The Ales
court construed N.C. Gen. Stat. §97-10.2(j) such that reaching a final
settlement between a third party and an employee is a jurisdictional
prerequisite to the judge being able to determine whether an employer’s lien
should be modified or eliminated. Id.
In
Ales, the third party and employee had reached a settlement agreement,
“contingent upon a waiver of the workers’ compensation lien.” Id. at
351, 593 S.E.2d at 454. The employee then made a motion for elimination of the
lien that was granted by the trial court. On appeal, the employer argued that
the settlement was not final and deprived the trial court of jurisdiction to
eliminate the lien. This Court framed the issue as: “whether N.C. Gen. Stat.
§97-10.2(j) provides the superior court with jurisdiction to adjust the amount
of a worker’s compensation lien when the terms of the settlement agreement are
contingent upon such adjustment.” Id. at352, 593 S.E.2d 454-55. The
Court went on to hold that it does not, since under contract law, the
adjustment would be a condition precedent to the settlement.
We
interpret N.C. Gen. Stat. §97-10.2(j) as permitting the superior court to
adjust the amount of a subrogation lien if the agreement between the parties
has been finalized so that only performance of the agreement is necessary to
bind the parties. An agreement containing a condition precedent which must be
fulfilled before either party is bound to the contract terms does not give the
trial court jurisdiction under N.C. Gen. Stat. §97-10.2(j).
Id. at 353, 593 S.E.2d at 455.
Although
plaintiff maintains that Ales and the present case are distinguishable,
we cannot agree. Plaintiff and Norfolk did reach a settlement, but it too was
not final. Plaintiff’s motion to the superior court requesting that it
extinguish the lien noted, “[a]t the mediation, Plaintiff tentatively agreed to
a settlement of $400,000, expressly dependent upon an agreeable solution to the
Workers’ Compensation subrogation.” Plaintiff also orally argued to the
superior court that “[a]fter a day of mediation we were able to resolve the
case tentatively, subject to a resolution of -- satisfactory resolution of the
workers’ compensation lien.” In its order, the superior court determined as a
finding of fact that “[t]his settlement was made subject to resolution of the
workers’ compensation lien that the carrier has asserted,” and the concluded
that “plaintiff and the Third Party settled this case at the above-mentioned
mediation for the sum of $400,000.00 . . . subject to the resolution of the
claim of subrogation and lien by the carrier.” All of this language suggests
that had the judge not extinguished the lien, there would be no settlement for
$400,000.00 between plaintiff and Norfolk, and the parties would return to the
negotiating table or trial; hence, a condition precedent.
Ales
and this case are indistinguishable, and as such, Ales controls our
decision here. In the Matter of Appeal from Civil Penalty, 324 N.C. 373,
384, 379 S.E.2d 30, 37 (1989) (“Where a panel of the Court of Appeals has
decided the same issue, albeit in a different case, a subsequent panel of the
same court is bound by that precedent, unless it has been overturned by a
higher court.”). This Court’s holding on the basis of Ales, however,
perhaps presents an unrecognized conflict.
On
the one hand, as plaintiff argues, it is common practice for employees and
third parties to come to tentative settlement agreements in which the only
contingency is that of satisfactory resolution of the workers’ compensation
lien. Yet, it is precisely this contingency that Ales proscribes.
Parties must be bound by the superior court’s decision, so long as it is not
arbitrary. See Wood v. Weldon, 160 N.C. App. 697, 586 S.E.2d 801 (2003)
(employer’s insurance carrier, employee, and third party bound by an
employee-third party settlement that placed a portion of the proceeds in escrow
to be paid either to carrier or employee according to a subsequent superior
court’s modification or elimination of the workers’ compensation lien).
Allowing otherwise would permit employees to compromise judicial efficiency by
proceeding to discount a superior court’s decision if it goes against them and
renegotiating a settlement that provides the same effect that they originally
sought.
On
the other hand, our decision may have an unintended statutory effect. If, as
the Ales court determined, a final settlement is a prerequisite to
petitioning a judge under subsection (j), then the requirements of N.C. Gen.
Stat. §97-10.2(h) still should govern the settlement. N.C. Gen. Stat.
§97-10.2(h) (2003) reads, in pertinent part:
[i]n
any . . . settlement with the third party, every party to the claim for
compensation shall have a lien to the extent of his interest under (f) hereof
upon any payment made by the third party by reason of such injury or death,
whether paid in settlement, . . . and such lien may be enforced against any
person receiving such funds. Neither the employee or his personal
representative nor the employer shall make any settlement with or accept any
payment from the third party without the written consent of the other and no
release to or agreement with the third party shall be valid or enforceable for
any purpose unless both employer and employee or his personal representative
join therein; provided, that this sentence shall not apply:
. . .
(2) If
either party follows the provisions of subsection (j) of this section.
Id. (emphasis added). Section 97-10.2(h) is the statutory
authority for the lien. And, it is clear that no release or settlement is
binding unless the employee, the employer, and the third party all consent. So
by its very nature, subsection (h) prevents a settlement from occurring without
the consent of everyone involved. The only way to settle a claim without the
consent of all the parties is to proceed under subsection (j), which with the Ales
decision is inapplicable absent a final settlement before invoking the
provision.
Interpreting
the Ales decision, along with subsection (h), seems to render litigants
unable to get to (j) without a final settlement and unable to settle without
the consent of all parties. It is clear from subsection (j) that the
legislature did not intend this cause and effect since subsection (j) makes the
consent of the employer (and hence the carrier, whose rights are subrogated
from the employer, see N.C. Gen. Stat. §97-10.2(g)) irrelevant to a
decision by the judge to modify a lien that arises from a settlement. N.C. Gen.
Stat. §97-10.2(j) (2003).
Thus,
making “settlement” a jurisdictional issue and determining that a settlement
must leave nothing to chance, the Ales decision has possibly added an
unintended complication to subsection (j). Nonetheless, this panel of the Court
is bound by our previous panel, and we accordingly vacate the superior court’s
order eliminating the workers’ compensation lien. As such, we do not reach
Liberty’s other assignments of error.
Vacated
and remanded.
Judges
McGEE and McCULLOUGH concur.