Source: https://wcc.state.ct.us/crb/2005/4764crb.htm
Timestamp: 2019-04-26 14:05:02+00:00

Document:
The claimant was represented by Robert Carter, Esq., Carter & Civitello, Woodbridge Office Park, One Bradley Road, Suite 301, Woodbridge, CT 06525.
The respondent was represented by Donna Hixon-Smith, Esq., Assistant Attorney General, 55 Elm St., P.O. Box 120, Hartford, CT 06141-0120.
This Petition for Review from the December 2, 2003 Finding and Denial of Motion for Repayment and Motion to Reopen Fee Agreement/Award of the Commissioner acting for the Third District was heard July 30, 2004 before a Compensation Review Board panel consisting of the Commission Chairman John A. Mastropietro and Commissioners A. Thomas White, Jr., and Charles F. Senich.
JOHN A. MASTROPIETRO, CHAIRMAN. The respondent has petitioned for review from the December 2, 2003 Finding and Denial of Motion for Repayment and Motion to Reopen Fee Agreement/Award of the Commissioner acting for the Third District. Its contention on appeal is that the trial commissioner erred by ruling that the state did not have standing to seek repayment of an attorney’s fee that was paid by the claimant to his counsel. We find no error, and affirm the trial commissioner’s decision.
The claimant suffered a heart attack in 1992. At that time, he was working as a deputy warden for the Department of Correction. This led to the filing of a heart and hypertension claim against his employer pursuant to § 5-145a C.G.S. The claimant was represented in that case by Robert Carter, Esq., of the Carter & Civitello law firm. On January 8, 1996, the state advanced the claimant twelve weeks of temporary total disability benefits, totaling $6,107.76. December 2, 2003 Findings, ¶ 4. Following a formal hearing, the trial commissioner issued a decision on November 7, 1997 awarding benefits pursuant to § 5-145a, which grants to certain state personnel a rebuttable presumption of compensability if they suffer disability or death due to hypertension or heart disease. The respondent then appealed that decision. While the appeal was pending, the claimant was paid $79,400.88 as per § 31-301(f), which allows payment of an award pending appeal. The claimant endorsed that check to his attorneys, who had contracted for a 20% attorney’s fee from the claimant. The firm deducted a $15,880 attorney’s fee along with $741.53 in costs, and then paid the $62,779.17 balance of the award to the claimant. December 2, 2003 Findings, ¶¶ 9-12.
The respondent’s appeal subsequently proved to be successful. Because the trier had failed to consider the respondent’s rebuttal evidence, this board reversed the trier’s award and remanded the case for further findings. Horn v. State/Dept. of Correction, 3727 CRB-3-97-11 (December 16, 1998). On remand, the trier issued a Corrected Finding and Award dated January 21, 2000 that focused on outside stress factors that had affected the claimant, such as domestic problems, financial difficulties and cigarette smoking. The trier concluded that the statutory presumption had been rebutted, and dismissed the claim for compensation. This board affirmed that decision on appeal, noting in the process that binding presumptions of compensability in our workers’ compensation law had been declared unconstitutional. Horn v. State/Dept. of Correction, 4177 CRB-3-00-1 (February 22, 2001)[hereinafter Horn II].
In the December 2, 2003 decision currently before us, the trier was acting on the respondent’s Motion for Repayment and its Motion to Reopen the fee agreement and/or the award. The trier found that the respondent had moved for the repayment of the sums paid pending appeal sometime around October 2000, as per § 31-301(g). Following this board’s decision in Horn II, the claimant filed an appeal with the state Appellate Court, which was withdrawn after the claimant filed a Chapter 7 petition in United States Bankruptcy Court on or about March 21, 2001. The petition listed among the claimant’s creditors this Commission (with a debt of $185,000), and Donna Hixon-Smith, Esq., in her capacity as counsel for the respondent State of Connecticut (with a listed debt of $0.00). The law firm of Carter & Civitello was not mentioned in the petition. The state moved for an exemption from the bankruptcy stay in May 2001, which motion was granted after a hearing. The state also requested that Carter & Civitello repay the claimant the $16,621.71 amount they retained in February 1998 1, plus 10% interest. Attorney Carter declined to repay that amount to the state. Meanwhile, the claimant’s debts were discharged by the Bankruptcy Court on July 3, 2001. The state did not object to the discharge, or make a claim against the claimant for repayment.
The trial commissioner concluded that the only means provided by the Workers’ Compensation Act to recover sums paid pending appeal is via § 31-301(g), which allows a respondent to pursue a claimant for recovery of the entire amount paid. However, the claimant’s debt was discharged in bankruptcy. The respondent had not obtained a security interest in the benefits previously paid under § 31-301(f), which would have given it some protection in the event of the claimant’s bankruptcy. The trier also noted that the respondent failed to request that any preferential transfers by the claimant be set aside by the bankruptcy court, including transfers made to counsel as payment for legal fees. Further, this Commission had not ordered the respondent to pay attorney’s fees to Attorney Carter under § 31-300, nor had it set counsel’s fee under § 31-327. It followed that the respondents’ motion to reopen the purported award had to be denied, for no award had ever been made. The trier additionally ruled that the respondent had no standing to reopen the fee agreement between the claimant and his counsel, as it was not a party to that agreement. The respondent had paid benefits to the claimant, and not to claimant’s counsel. Accordingly, the trier denied the respondents’ motion for repayment as well. The respondent has appealed the denial of its motions to this board.
Before we discuss the numerous theories of error raised by the respondent in its brief, we first address a point raised by the claimant’s attorney at oral argument. The claimant observes that there was never an order entered by a trial commissioner requiring the respondent to pay benefits pending appeal. Following the trial commissioner’s November 7, 1997 Finding and Award and the respondent’s ensuing petition for review to this board, the claimant moved for the entry of an order directing the respondent to make payment of disability benefits while the appeal was pending. That motion was filed on December 12, 1997. The trial commissioner did not rule on the motion. Of its own volition, the respondent issued a check for the full amount of the $79,400.88 award to the claimant on January 29, 1998. See n.1, supra; Joint Exhibit 4.
During the pendency of any appeal of an award made pursuant to this chapter, the claimant shall receive all compensation and medical treatment payable under the terms of the award to the extent the compensation and medical treatment are not being paid by any health insurer or by any insurer or employer who has been ordered, pursuant to the provisions of subsection (a) of this section, to pay a portion of the award. The compensation and medical treatment shall be paid by the employer or its insurer.
See Stipulation of Facts, ¶¶ 8-9. The respondent’s subjective intent in making this payment certainly carries weight, as does the claimant’s prior motion for the payment of benefits. Still, before we can place the respondent’s payment to the claimant in the proper legal context, we must determine whether the absence of a § 31-301(f) order from the commissioner impedes the application of the statute to this case.
Originally, § 31-301(f) placed the obligation to pay benefits pending appeal upon the Second Injury Fund. See Public Acts 84-133, 86-27. In 1995, the statute was amended to make the award payable by the employer or insurer rather than the Fund. Public Act 95-277, § 9(f). With respect to the pre-1995 version of § 31-301(f), this board has held that an underlying order of benefits against the employer or insurer must be in place before the Fund can be ordered to make payment. Yablonski v. Danbury Hospital, 15 Conn. Workers’ Comp. Rev. Op. 166, 3107 CRB-7-95-7 (February 13, 1996). In Yablonski, we did not address whether the entry of an order against the Fund was itself a mandatory prerequisite to liability, akin to the procedure specifically set forth in § 31-355(b) C.G.S. for “no insurance” cases. Under § 31-355(b), the Fund’s liability is not triggered until the commissioner (1) enters a finding that the employer or insurer has failed to, or is unable to, pay an award of compensation, and (2) notifies the Treasurer of the award and directs the Treasurer to make payment from the Fund. See Bethune v. A&A Seafood, 9 Conn. Workers’ Comp. Rev. Op. 79, 927 CRD-3-89-10 (February 20, 1991). Though the legislature could have imitated this model for § 31-301(f), it did not do so.
We believe that this distinction is suggestive of legislative intent. See Luce v. United Technologies Corp., 247 Conn. 126, 133 (1998)(relationship of statute to existing legislation on similar subject matter helps resolve ambiguities). The § 31-301(f) remedy was originally designed to be a temporary assignment of funds that would be repaid by either the claimant or the employer/insurer depending on the outcome of the appeal. It was not conceived as a substantive assignment of benefits. “The method chosen by the legislature of accelerating payment to a claimant does not affect a substantive right of the insurer because a claimant is statutorily obligated to repay, with interest, all benefits received by the claimant to which it is found the claimant was not entitled.” Coley v. Camden Associates, Inc., 243 Conn. 311, 318 (1997). Thus, it would have been feasible for the legislature to facilitate such a payment without mandating the entry of a specific award against the Fund.2 The same reasoning applies with regard to the current version of the statute, wherein benefits are payable by the employer or insurer. As the § 31-301(f) remedy is construed to be a procedural tool designed to accelerate the payment of benefits; Coley, supra; Annechiarico v. Friendly Ice Cream Co., 6 Conn. Workers’ Comp. Rev. Op. 18, 640 CRD-7-87 (September 16, 1988); it would be rational, even optimal, for the system to allow payment to be made as soon as a respondent has appealed, without having to await the entry of a second order.
This reasoning is bolstered by the language of § 31-301(f), which states that “during the pendency of any appeal of an award made pursuant to this chapter, the claimant shall receive all compensation and medical treatment payable under the terms of the award,” and provides that these benefits “shall be paid by the employer or its insurer.” The use of the term “shall” signifies that the contemplated act is one that, at minimum, has been directed by the legislature. Stewart v. Tunxis Service Center, 237 Conn. 71, 76 (1996); Donohue v. Zoning Board of Appeals, 155 Conn. 550, 554 (1967). Indeed, the use of “shall” frequently denotes that a provision is mandatory. “In determining whether a statute is mandatory or merely directory, the most satisfactory and conclusive test is whether the prescribed mode of action is of the essence of the thing to be accomplished or, in other words, whether it relates to matter of substance or matter of convenience.” Donohue, supra.
Here, by expediting payment pending the outcome of the appeal, the essence of the statutory purpose is to prevent claimants from having to endure financial hardship during a lengthy appellate process following an award of compensation. Though § 31-301(f) is classified as a procedural remedy; Coley, supra; the substance of that remedy is the statutory direction to the employer or insurer that compensation be paid pending appeal. Once an award has been made pursuant to chapter 568, the language of the statute directs the payment of benefits without the need for an intervening exercise of discretion on the part of a Workers’ Compensation Commissioner. Were this the only relevant consideration, there would be a strong argument that the term “shall” in § 31-301(f) is intended to be mandatory.
In construing § 31-301(f), however, we must remain aware of § 31-301(g). This subsection requires that, in the event final adjudication results in a denial of compensation to a claimant who has received benefits pursuant to § 31-301(f), “the claimant shall reimburse the employer or its insurer for all sums previously expended, plus interest at the rate of ten per cent per annum.” There are many claimants who would not want to risk having to repay a § 31-301(f) award along with such a significant amount of interest. They might prefer instead not to receive payment pending appeal. As the sole purpose of § 31-301(f) is to assist claimants, they should retain the option to avoid a risk that might result in further financial hardship. Thus, we hold that § 31-301(f) requires the payment of benefits pending appeal upon request by the claimant, as was done in this case. This construction of the statute is consistent with its remedial legislative purpose, and does not run afoul of the statutory language. Compare State v. Stern, 65 Conn. App. 634 (2001)(search warrant requirement was held to be directory rather than mandatory, as it was stated in affirmative terms and contained no language expressly excluding evidence obtained without warrant), cert. denied, 258 Conn. 935 (2001); State v. Lewis, 58 Conn. App. 153 (2000)(failure of probation officer to provide defendant with written statement of conditions of probation did not require reversal of court order revoking probation; use of “shall” was directory, as no penalty was provided for failure of court to deliver copy of probation conditions, and claimant was not entitled to warning that committing subsequent felony would violate probation).
Having established that the respondent’s payment of benefits pending appeal was made to the claimant pursuant to § 31-301(f), we now consider the effect of § 31-301(g).3 That subsection addresses § 31-301(f) beneficiaries whose entitlement to compensation has been denied on appeal after final adjudication. Such claimants are specifically required to reimburse the employer or insurer for all sums expended, along with interest. The statute makes no mention of recovery rights against other entities who may have received payment out of the § 31-301(f) proceeds, such as attorneys or physicians. This poses a problem for the respondent, which seeks to recover the portion of its § 31-301(f) payment that was paid over to claimant’s counsel. Without the statutory authority to impose a particular remedy under the Workers’ Compensation Act, a commissioner has no basis upon which to make such an order. See Castro v. Viera, 207 Conn. 420, 430 (1988)(commissioner’s powers depend on statutory authority); see also, Kinney v. State, 213 Conn. 54, 58-59 (1989)(despite remedial and humanitarian purpose of Workers’ Compensation Act that justifies broad construction, Commission may not transcend jurisdictional boundaries defined by statute).
The respondent argues that this Commission may interpose itself in this dispute based on its power to oversee attorney’s fees under § 31-327 C.G.S., and on its power to modify awards in the event of changed circumstances under § 31-315 C.G.S. Attorney’s fees, like the fees of physicians and other service providers under the Workers’ Compensation Act, are subject to the approval of the commissioner under § 31-327(b). When fees are to be paid directly by the employer or insurer, § 31-327(a) allows the trier to make an award directly in favor of the person or organization entitled to the fees or expenses.
In the instant case, no such award was made under § 31-327(a), as counsel’s fees were owed by the claimant rather than the respondent. Once benefits were awarded to the claimant and paid by the respondent, the claimant’s attorney deducted his fee from the money that his client had received. The transaction between the claimant and his counsel was a separate matter from the respondent’s payment of the award, and was not governed by the terms of the award. The trial commissioner did not exercise his latent authority under § 31-327 to make a finding regarding the fee, nor did any of the concerned parties place counsel’s fee agreement before him for approval. See Prioli v. State Library, 64 Conn. App. 301, 309-10 (2001), citing Ayala v. Konover Residential Corp., 14 Conn. Workers’ Comp. Rev. Op. 87, 1931 CRB-2-93-12 (May 12, 1995) (commissioner has authority to oversee fee arrangement whether or not parties have indicated discontent). Because payment was made independently of any order, there is no attorney’s fee award to reopen or modify pursuant to § 31-315.
The respondent also attempts to invoke equitable remedies on its behalf. Under one theory, a constructive trust would be imposed on counsel’s fee, with this “windfall” to be repaid to the state. See Brief, p. 10. Under another theory, the doctrine of unjust enrichment would require the repayment of all attorney’s fees and expenses. A third theory paints the respondent as a third-party beneficiary of the fee agreement between the claimant and his counsel. We do not agree that any of these theories allow for the maintenance of a claim against the claimant’s counsel in this forum.
First, the Workers’ Compensation Act does not provide a commissioner with specific authority to resolve repayment disputes between a respondent and a claimant’s payees. See Stickney v. Sunlight Construction, Inc., 248 Conn. 754, 764 (1999)(act must provide explicit authority to determine issue central to dispute); Castro, supra, 435. Equitable concepts may be relevant in this forum, but only if the underlying claim is properly before the commissioner. For example, a trier of fact may proceed in accordance with the rules of equity in taking testimony and conducting hearings as per § 31-298, and equitable principles may be applied to disputes that clearly arise under the Act. Stickney, supra, 765; Schreck v. Stamford, 3322 CRB-7-96-4 (May 17, 2001)(equitable principle of reliance was applicable), rev’d on other grounds, 72 Conn. App. 497 (2002). However, the Act does not provide the commissioner with specific jurisdiction over particular types of equitable and common-law claims or questions. Stickney, supra. Otherwise, “there would be no legal question that the commissioner, who has limited jurisdiction, could not reach under the guise of equity. Such a broad construction of subject matter jurisdiction under the act is simply untenable.” Stickney, supra, 766.
Second, we observe that this Commission requires claimants’ attorneys to enter into written fee agreements with injured workers at the time representation is engaged, pursuant to Memorandum No. 2001-03. See also, Rules of Professional Conduct, § 1.5(c) (contingent fee agreement shall be in writing and shall state method by which fee is to be determined). No involvement by the opposing party is contemplated, nor is this requirement designed to somehow benefit the opposing party.4 Accordingly, the respondent was not made privy to any of the attorney-client transactions between the claimant and the firm of Carter & Civitello. Responsibility for paying counsel’s fee under the contract was solely that of the claimant.
In terms of the respondent’s unjust enrichment claim, contractual privity would be necessary before such a theory could be applied. However, no such privity exists. Also, the respondent may not attain privity by figuratively stepping into the shoes of the claimant under his fee agreement with counsel, as the respondent did not contractually subsidize the debt owed by the claimant under the fee agreement. Compare Wasko v. Manella, 269 Conn. 527, 548 (2004)(under theory of equitable subrogation, insurer stepped into shoes of insured in order to recover from negligent tortfeasor payment to insured that was made under insurance contract). The claimant aptly cites Gagne v. Vaccaro, 255 Conn. 390, 401 (2001), in which the state Supreme Court explained that the doctrine of unjust enrichment applies whenever justice requires that compensation be given for property or services rendered pursuant to a contract, and no remedy is available under the contract. The respondent’s only contract was with the claimant. The claimant, in turn, had a separate contingency fee agreement with counsel for his services, pursuant to which the attorney’s fee was paid. The respondent does not have standing to step in and assert rights under that contract, including a claim for unjust enrichment based on the ultimate reversal of the claimant’s 1997 award.
Similarly, a constructive trust exists only where a party breaches a fiduciary duty owed to another party, or obtains property by fraud, duress, abuse of confidence, or other improper means that violates equity and good conscience, on the theory that such party would be unjustly enriched were he permitted to retain the property so held. Jaser v. Fischer, 65 Conn. App. 349, 356, 359 (2001)(no constructive trust where administrator of estate owed no fiduciary duty to creditor of beneficiary). There is no fiduciary relationship between a claimant’s attorney and a respondent under either Rule 1.15(b) of the Rules of Professional Conduct5, or under controlling case law. See Biller Associates v. Peterken, 269 Conn. 716, 726 (2004). The claimant’s attorney here received his fee pursuant to a valid contract for services rendered, and not by improper means. Under these circumstances, it is beyond the power of this Commission to create a right of recovery for the respondent via the imposition of a constructive trust.
The respondent also argues that the trial commissioner incorrectly deprived it of the opportunity to review the fee agreement between the claimant and his attorney. The respondent requested that it be allowed to examine that document in order to determine whether it contained language indicating that the state might qualify as a third-party beneficiary under the contract. It hypothesized that beneficiary status could potentially arise from contractual language providing for the disposition of the fees and expenses in the event the case was reversed and the state became entitled to repayment. “We specifically request . . . that anything privileged be redacted from any letters and any part of the Fee Agreement that would be privileged. We’re simply looking for the facts relevant to this issue, not counsel’s guidance to his client.” March 25, 2003 Transcript, p. 4. The claimant moved to quash the state’s subpoena, stating that as a matter of principle, he did not want to turn over the fee agreement to the respondent. Id., p. 6; see also p. 31. Instead, the claimant submitted the fee agreement to the trial commissioner, who stated that he would consider the document and, if necessary, call another hearing for the purpose of making a decision. Id. No such hearing was ordered. The trier ultimately ruled in ¶ F of his Finding and Dismissal that the respondent had no standing to reopen the fee agreement because it was not a party to the contract.
The test to be applied in determining whether an entity has a right of action as a third party beneficiary is whether the parties to the contract mutually intended the promisor to assume a direct obligation to the alleged third party beneficiary, based upon the terms of the contract read in light of the circumstances attendant to its making. Pelletier v. Sordoni/Skanska Construction Co., 264 Conn. 509, 531 (2003); Grigerik v. Sharpe, 247 Conn. 293, 311-12 (1998). The fact that an entity might be a foreseeable beneficiary of certain contractual provisions does not by itself create in the obligor a legal duty to that entity. Pelletier, supra, 531-32. Thus, in order for the fee agreement to make the state a third-party beneficiary in the manner posited by the respondent, both the claimant and his counsel would have had to intend to make counsel liable directly to the respondent in the event moneys had to be repaid.
Part of the trier’s duty in making evidentiary rulings under § 31-298 is to balance the importance of protecting privileged communications against the relevance and materiality of the evidence sought. The privilege given to attorney-client communications is vital, for it instills clients with confidence that they can fully disclose the facts of a case to facilitate effective legal representation. A trial commissioner is justified in preserving as much of this privilege as is possible. See Metropolitan Life Ins. Co. v. Aetna Casualty & Surety Co., 249 Conn. 36, 48 (1999)(important not to weaken privilege with various exceptions). Here, the claimant has never waived the attorney-client privilege. Rather than releasing the fee agreement between him and his counsel for the respondent’s review, the trier reasonably determined that an in camera inspection of the fee agreement was the appropriate safeguard of the attorney-client privilege. This approach is consistent with our case law. See, e.g., Vetre v. State, 3948 CRB-6-98-12 (February 14, 2000)(in camera inspection was appropriate with respect to claimant’s psychiatric records).
Based upon his in camera review, the trier concluded that the respondent did not have standing to reopen the fee contract. On review, we find no error with regard to this ruling. As the claimant has been discharged in bankruptcy, his involvement in this case has ended. Under Stickney, supra, our authority to consider a third-party beneficiary claim under these circumstances is doubtful, as the claimant no longer has a stake in the proceedings, and the Act provides no specific authority to pursue recovery from counsel.
Moreover, as an attorney, the trial commissioner also possessed the professional expertise to review the agreement and judge that the contract did not contain terms that could potentially be construed to confer a third-party beneficiary status on the respondent. Indeed, to find such a provision in an attorney-client contract would be very unusual given the nature of that relationship, which is one of zealous advocacy and undivided loyalty to the client. Biller, supra, 726; Newman v. Newman, 35 Conn. App. 449, 454 (1994). We defer to the trial commissioner’s determination regarding the contractual language in this instance, and find no error with regard to his evidentiary ruling.
The bankruptcy of a claimant often has a harsh effect on creditors whose debts are discharged, even taking into account the rights granted by the Bankruptcy Code. Ultimately, this is a case in which the respondent seeks to partially avoid the effects of the claimant’s bankruptcy by seeking recourse from the claimant’s attorney as a means of recovering benefits paid pursuant to § 31-301(f). Such an avenue of relief is not permitted by the Workers’ Compensation Act, and does not appear to be supported by broader legal and equitable theories. Accordingly, we affirm the trial commissioner’s decision to deny the respondent’s Motion for Repayment, and its Motion to Reopen the attorney’s fee agreement between the claimant and his counsel.

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