Opinion ID: 2167564
Heading Depth: 2
Heading Rank: 2

Heading: Whether the Circuit Court Erred in Granting Banner's Motion to Waive its Workers' Compensation Lien After the Return of the Jury's Verdict

Text: The Illinois Workers' Compensation Act (820 ILCS 305/1 (West 1996)) enables an injured worker to institute legal proceedings against tort-feasors responsible for causing the worker injury, and for which the worker receives workers' compensation. If the worker prevails in his personal injury lawsuit, the settlement or judgment received by the worker is dedicated to repaying workers' compensation paid by his employer. 820 ILCS 305/5(b) (West 1996). The employer may claim a lien on the worker's recovery, in an amount equal to the amount of workers' compensation due the worker. 820 ILCS 305/5(b) (West 1996). Section 5(b) of the Workers' Compensation Act provides further that, should the worker's third-party action prevail, then, from the compensation reimbursed to the employer, the employer must pay its pro rata share of the worker's costs of bringing the litigation and, unless otherwise agreed, 25% of plaintiff's counsel's legal fees. 820 ILCS 305/5(b) (West 1996); Ramsey v. Morrison, 175 Ill.2d 218, 237, 222 Ill.Dec. 100, 676 N.E.2d 1304 (1997). The legislature enacted the costs and fee provisions of section 5(b) to ensure that an employer    contribute[s] to the necessary costs of the employee's recovery against a negligent third party where the employer is to receive reimbursement from the recovery for [workers'] compensation payments made or to be made to the employee. Reno v. Maryland Casualty Co., 27 Ill.2d 245, 247, 188 N.E.2d 657 (1962). Additionally, an employer can choose not to seek reimbursement of its workers' compensation obligation. An employer can waive the lien it holds on the worker's recovery in his personal injury action. Under the authority of Lannom v. Kosco, 158 Ill.2d 535, 199 Ill.Dec. 743, 634 N.E.2d 1097 (1994), moreover, by waiving its section 5(b) lien, the employer may avoid liability for contribution to the other tort-feasors allegedly responsible for the worker's injury. The controversy at bar arises from Banner's decision to waive its workers' compensation lien after the jury returned its verdict in plaintiff's personal injury lawsuit. The trial court granted Banner's motion to waive its lien, but the appellate court reversed. The appellate court held that an employer may not waive its workers' compensation lien posttrial and thereby avoid its fees and costs obligation to its employee. 293 Ill. App.3d at 275, 227 Ill.Dec. 828, 688 N.E.2d 309. The appellate court ruled that an employer's workers' compensation lien constitutes a right to reimbursement and that [a]fter plaintiff recovers from a third party, the employer's right to reimbursement is statutorily reduced under section 5(b) by the employee's entitlement to a proportionate share of fees and costs. 293 Ill.App.3d at 275, 227 Ill.Dec. 828, 688 N.E.2d 309. Accordingly, the employer should not be allowed to circumvent payment of its section 5(b) fees and costs, after the cause has proceeded through trial. 293 Ill.App.3d at 275, 227 Ill.Dec. 828, 688 N.E.2d 309. Section 5(b) plainly predicates the employer's obligation to pay costs and fees on actual reimbursement of workers' compensation payments from the fund created by the employee. See Ramsey, 175 Ill.2d at 237-38;, 222 Ill.Dec. 100, 676 N.E.2d 1304 820 ILCS 305/5(b) (West 1996). Section 5(b) states in pertinent part:  Out of any reimbursement received by the employer pursuant to this Section the employer shall pay his pro rata share of all costs and reasonably necessary expenses in connection with such third-party claim, action or suit and where the services of an attorney at law of the employee or dependents have resulted in or substantially contributed to the procurement by suit, settlement or otherwise of the proceeds out of which the employer is reimbursed, then, in the absence of other agreement, the employer shall pay such attorney 25% of the gross amount of such reimbursement.  (Emphasis added.) 820 ILCS 305/5(b) (West 1996). In this case, Banner waived its right to the lien without ever seeking reimbursement of its workers' compensation payments. The express, statutory condition precedent ( Corley v. James McHugh Construction Co., 266 Ill.App.3d 618, 622, 203 Ill.Dec. 555, 639 N.E.2d 1374 (1994)) to payment of costs and fees under section 5(b) was never fulfilled. Ipso facto, Banner's obligation to pay costs and fees was never triggered. Corley, 266 Ill.App.3d at 621, 203 Ill.Dec. 555, 639 N.E.2d 1374 (in the absence of a waiver of the workers' compensation lien, the employer must pay his pro rata share of costs and expenses and, unless otherwise agreed, must pay as fees to the employee's attorney 25% of the gross amount of such reimbursement (emphasis in original)). In fact, Corley v. James McHugh Construction Co., 266 Ill.App.3d 618, 621, 203 Ill.Dec. 555, 639 N.E.2d 1374 (1994), a case on which the appellate court relies, expressly rejected a suggestion that the plaintiff should receive section 5(b) costs and fees even when the employer waived the workers' compensation lien. The Corley court would not shift responsibility for the section 5(b) costs and fees to the defendants in the underlying personal injury suit. According to the appellate court, the terms employed in section 5(b) left no question as to who should pay the expenses and out of what funds: Section 5(b)'s plain language thus provides that the employer must pay the amounts out of any reimbursement that it receives. Where, as here, the employer waives its right to that reimbursement, the condition precedent of having received the reimbursement as anticipated by section 5(b) never occurred. As a result, the employer is not under any duty or obligation to contribute to the employee's cost of obtaining the recovery.    The policy behind section 5(b) is to compensate plaintiff for obtaining a judgment from which an employer is reimbursed. [Citation.] Here, the employer waived that reimbursement to the benefit of [plaintiff] so he is not entitled to those fees, costs, and expenses. Corley, 266 Ill.App.3d at 622-24, 203 Ill.Dec. 555, 639 N.E.2d 1374. In Silva v. Electrical Systems, Inc., 183 Ill.2d 356, 233 Ill.Dec. 656, 701 N.E.2d 506 (1998), we recently reaffirmed that section 5(b) should be interpreted according to its text. There, the employer accepted reimbursement of its workers' compensation payments after plaintiff obtained a successful verdict in his personal injury suit. Rather than pay the statutory fees and costs from the gross distribution as prescribed by section 5(b), the employer insisted that it could deduct its contribution liability from the reimbursement and calculate section 5(b) costs and fees on the difference. This court rejected the employer's reading of section 5(b). The employer's plan would force plaintiff's counsel to subsidize [an employer's] lack of due care, since the greater the employer's contribution liability, the more the employer could deduct from the reimbursement and, correspondingly, the smaller the amount employer would owe to plaintiff, particularly in terms of attorney fees. The court found that justification for its holding lay in the unadorned terms of section 5(b). Silva, 183 Ill.2d at 366, 233 Ill.Dec. 656, 701 N.E.2d 506; see also Ramsey, 175 Ill.2d at 237-38, 222 Ill.Dec. 100, 676 N.E.2d 1304; Branum v. Slezak Construction Co., 289 Ill.App.3d 948, 966, 225 Ill.Dec. 88, 682 N.E.2d 1165 (1997) (obligation to pay fees and costs dependent on reimbursement). In the instant case, the appellate court characterized the timing of Banner's lien waiver as a gamble and stated that Banner only decided to waive the lien after plaintiff won the underlying lawsuit and it became apparent that, absent waiver of the lien, Banner would be liable for litigation expenses under section 5(b). 293 Ill.App.3d at 275, 227 Ill.Dec. 828, 688 N.E.2d 309. The appellate court implied too that, by waiting until after the verdict to waive its lien, Banner essentially received the benefit of the employee's lawsuit ( i.e., a money judgment against the defendants), while avoiding the price demanded for that benefit by statute. According to this reasoning, whether the employer actually demands reimbursement for its workers' compensation payments or not is irrelevant: merely having the right or possibility of reimbursement following a verdict for the injured employee is enough to trigger the obligations of the employer under section 5(b). We think that the appellate court misconstrued section 5(b). The benefit that obligates an employer to pay section 5(b) fees and costs is actual reimbursement, not merely the possibility of reimbursement. Stated differently, the premise animating section 5(b) is that an employer should not get something (a reimbursement on workers' compensation payments) for nothing. Yet if the employer never demands the something, then no unfairness occurs. Also, we find nothing inherently unfair in Banner's strategy. Nothing in section 5(b) required Banner to waive the lien by a date certain if it wanted to forgo payment of statutory fees and costs. There is no record evidence, either, that plaintiff relied on Banner's potential liability for fees and costs in making his own decision to file the underlying personal injury lawsuit. Indeed, plaintiff must have known from the outset that, if plaintiff's own gamble in filing suit failed, plaintiff would have borne the sole responsibility for the cost of bringing the suit. Further, although plaintiff's expenses, including attorney fees, presumably increased with the return of a favorable jury verdict, the fund from which plaintiff would have to pay those expenses was greater, as well. Plaintiff also characterizes Banner's decision as a calculated venture that allowed Banner to minimize its liability for plaintiff's injury. Specifically, plaintiff maintains that Banner did not want to waive its lien before trial even though waiver would have won Banner dismissal from Kemlite's third-party action for contribution. Lannom, 158 Ill.2d at 543, 199 Ill.Dec. 743, 634 N.E.2d 1097. According to plaintiff, Banner decided to waive the lien only after the jury returned a contribution verdict against Banner that exceeded the amount of Banner's lien, and Banner decided that it would be most advantageous to waive the lien, exploit the Kotecki cap placed on liability for contribution, and avoid fees and costs prescribed by section 5(b). As stated previously, plaintiff cites no authority that would bar plaintiff from minimizing its exposure in a lawsuit. We are reluctant to dictate trial strategy to any litigant when that strategy is entirely consistent with controlling statutes and prior decisions of this court. We note as well that regardless of when Banner waived its lien, its contribution liability was always capped at the same amount. Whether Banner waived its lien before or after the verdict, Kotecki and its progeny limited the maximum contribution liability for Banner to the amount paid by Banner in workers' compensation. Without citation to authority, plaintiff argues that a result affirming the circuit court will frustrate the Contribution Act. However, the result we reach today is consistent with prior decisions of this court. In Kotecki v. Cyclops Welding Corp., 146 Ill.2d 155, 162-65, 166 Ill.Dec. 1, 585 N.E.2d 1023 (1991), we stated that the Contribution Act and Workers' Compensation Act are distinct statutory schemes and the operation of one may not always complement the operation of the other. Sometimes, we will tolerate a result that partially frustrates the legislative purpose underlying the Contribution Act if, by doing so, we allow the workers' compensation statute to operate as intended. Kotecki, 146 Ill.2d at 164, 166 Ill.Dec. 1, 585 N.E.2d 1023 (capping contribution liability at the amount of the employer's workers' compensation obligation arguably strikes a balance between the competing interests of the employer, as a participant in the workers' compensation system, and the equitable interests of the third-party plaintiff in not being forced to pay more than its established fault). The implementation of section 5(b) in this case is one of those instances in which we will knowingly curtail operation of the Contribution Act. Plaintiff further views a post-verdict waiver of a workers' compensation lien as a disincentive to settlement. Plaintiff apparently means that he could not have settled with Kemlite until he knew absolutely how much money he could obtain from his employer for his injuries, without fear of having to pay back that money in the event the plaintiff prevailed in his personal injury action. Plaintiff's premise is flawed, however, since nothing legally prevented plaintiff from settling with Kemlite, regardless of Banner's refusal to waive its lien. Moreover, there was no assurance that, if the lien was waived, the plaintiff would have automatically settled with the defendant. Depending on the degree of confidence plaintiff had in his case, plaintiff could have accepted the waiver and still proceeded to trial against Kemlite. Just because plaintiff could not negotiate from his most advantageous pretrial position, plaintiff was not precluded from settling with Kemlite, if he wanted to. Finally, we note practical difficulties latent in the appellate court's holding. If an employer could no longer waive its lien after verdict, up to what point in the litigation would waiver still be acceptable? Before trial begins? On the eve of the jury verdict? If an employer wants to waive the lien at the close of the plaintiff-employee's case, has plaintiff so committed himself (by retaining a lawyer, for example, and hiring expert witnesses) in terms of fees and costs that the employer should no longer be allowed to disentangle himself from the litigation by waiving its lien? What if, by waiving the lien, the employer will eliminate the need for a third-party contribution action and thereby reduce the time devoted to trial? We believe that these hypotheticals illustrate why we should be reluctant to depart form the text of section 5(b), and why we should interpret the statute according to its clearly stated terms.