Court Opinion

ID: 4200049
Source: CourtListenerOpinion
Date Created: 2017-08-30 16:08:56.945051+00
Date Added: 2024-06-11T14:41:31.272837
License: Public Domain

RENDERED: MARCH 23, 2017
                                                         TO BE PUBLISHED

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MARGIE MULLINS                                                       APPELLANT

                 ON APPEAL FROM COURT OF APPEALS
V.                    CASE NO. 2015-CA-00814-WC
            WORKERS' COMPENSATION BOARD NO. 13-WC-98656

LEGGETT & PLATT,                                                     APPELLEES
HONORABLE ROBERT L. SWISHER, ADMINISTRATIVE
LAW JUDGE AND
WORKER'S COMPENSATION BOARD

           OPINION OF THE COURT BY CHIEF JUSTICE MINTON

                                  AFFIRMING

      The Chief Administrative Law Judge approved Margie Mullins's

settlement of her workers' compensation claim for weekly permanent-partial

disability benefits and her election to accelerate the payment of her attorney's

fee to a lump-sum amount. Indisputably, the lump-sum attorney's fee payment

reduced Mullins's weekly benefit amount pro-rata. But in calculating Mullins's

weekly benefits remaining after deduction of the attorney's fee, the employer's

workers' compensation insurance carrier applied a multiplier reflecting the

future periodic payment of the attorney's fee commuted to a present value. The

CAW overruled Mullins's objection to this calculation, and the Workers'

Compensation Board and the Court of Appeals upheld the CAW's ruling. We
affirm because we conclude that the Board and the Court of Appeals correctly

determined that the plain text of the Workers' Compensation Statutes and

regulations promulgated under those statutes contemplate the ability to deduct

present-value discounts for lump-sum payments effectuated by discounting

future benefits.

                   I. FACTUAL AND PROCEDURAL BACKGROUND.
      Margie Mullins sustained a workplace injury during the course of her

employment with Leggett & Platt. Through counsel, Mullins decided to settle

her workers' compensation claim after negotiating with Leggett & Platt's

insurance carrier, CCMSI. She then entered into a Form 110 Agreement as to

Compensation, which was approved by the CAW. The settlement award

included permanent-partial disability benefits awarded at a weekly rate of

$218.89 per week for a period of 425 weeks.

      Following approval of the settlement, Mullins moved the CAW for

attorney's fee. Her motion was sustained and counsel was awarded $9,401.41

in fees. In her Form 109 Attorney Fee Election, Mullins elected to have this

lump sum paid by Leggett and CCMSI in a single payment with her weekly

benefits to be reduced pro-rata. According to Mullins, dividing the $9,401.41

by the 373 remaining weeks yields a $25.20 reduction per week, meaning that

she anticipated her reduced weekly rate would then be $193.69.

      But CCMSI indicated that her reduced weekly benefits were actually

$191.36. Instead of simply dividing the fees by the remaining weeks, CCMSI

calculated that based on the Workers' Compensation statute and related

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administrative regulations, her reduced benefits must recoup the present-day

value of the lump-sum attorney's fee to account for the time-value of money.

Mullins filed a Motion for Determination, disputing CCMSI's calculation and

claiming that it was not authorized to take this additional discount. She claims

that this $2.33 per week reduction, which totals $869.09 in sum, allowed

CCMSI unilaterally to take extra money from her benefits without AW

approval, to perform the calculation itself, and thereby breach the terms of the

settlement agreement.

      The CAW 1 deniel her motion. He ruled that the statutory text and

accompanying administrative regulations supported CCMSI's calculation. The

Board affirmed the CAW's ruling. Mullins then appealed to the Court of

Appeals, which also affirmed the CAW. She now appeals to this Court.

                                      II. ANALYSIS.

   A. KRS 342.320 Authorizes the Discount.
      Mullins primarily argues that the Workers' Compensation Act does not

authorize attorney-fee discounts when benefits are paid periodically. Kentucky

Revised Statutes (KRS) 342.320 provides that a claimant is responsible for the

payment of his or her attorney's fees.2 The statute then offers the following

instructions to paying those fees:

       1 It should be noted that in the period between granting attorneys' fees and
Mullins's motion, a new CAW took office.
       2 KRS 342.320(2)(a) (" ... This fee shall be paid by the employee from the proceeds

of the award or settlement.).

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   4) Except when the attorney's fee is to be paid by the employer or
      carrier, the attorney's fees shall be paid in one of the following
      ways:
         a. The employee may pay the attorney's fee out of his or her
             personal funds or from the proceeds of a lump sum
             settlement; or
         b. The administrative law judge, upon request of the employee,
             may order the payment of the attorney's fee in a lump sum
            directly to the attorney of record and deduct the attorney's
            fee from the weekly benefits payable to the employee in equal
            installments over the duration of the award or until the
            attorney's fee has been paid, commuting sufficient sums to
            pay the fee. 3

It should first be noted that although Leggett & Platt, through CCMSI,

physically pays the lump-sum fee, Mullins is the one actually paying the

attorney. Mullins is responsible for compensating the attorney either out of her

own pocket or by seeking an advancement of her future weekly benefit

payments in order to offer immediate compensation to her attorney. And KRS

342.320(4)(b) simply offers her a mechanism to advance her payments.

      But more critical to her claim, Mullins argues that the strictures of KRS

342.320 do not allow CCMSI to consider the present value of future periodic

payments when calculating her reduced weekly benefit. Both the Court of

Appeals and the Board determined that the use of the phrase "commuting

sufficient sums to pay the fee" authorizes this present-value discount. Mullins

argues this imputes a meaning the word cannot bear. Instead, she contends

that this language is simply synonymous with an "exchange" or "alteration." So

according to Mullins, the statute merely states that her weekly benefits may be

      3   KRS 342.420(4).

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altered to pay the fee and does not specifically permit workers' compensation

insurers to discount the present value. She is mistaken.

      Though it is indeed true that the term commute may mean to "exchange"

or to "alter" as Mullins claims, we must review the plain meaning of the text in

light of its context. To be sure, commute in another context could mean "to

travel back and forth regularly (as between a suburb and a city)."4 Here, KRS

342.320 contemplates the payment of attorney fees and KRS 342.320(4)(b)

authorizes the commutation of sums to pay the fee. Based on this particular

context, the term commutation of payments best reflects the overall purpose of

this provision in light of the whole act. And this term bears its own meaning in

this context. A commutation of payments means "A substitution of lump-sum

compensation for periodic payments. The lump sum is equal to the present

value of future periodic payments. "5 So it appears that, in this context, the

statute is in fact contemplating a present-value discount of a lump-sum

payment made through deductions from future periodic payments. And this

makes sense. Applying this principle recognizes the time-value of money and

the truism that a dollar paid today is worth more than a dollar paid tomorrow.

      In addition to what appears to be the plain meaning of the text, we have

a long history of affirming that meaning in this context. In Hicks v. General

Refractories Co., we recognized that the definition of commute in this context

allows employers or carriers to deduct more than the nominal attorney-fee

      4   Merriam-Webster's Collegiate Dictionary (10th ed. 2002).
      s   Black's Law Dictionary (10th ed. 2014).

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figure; it allows them to account for the present day value o~ the sum. 6 Indeed,

in Hicks we declared that "To require General Refractories to prepay a portion

of Hicks's compensation award without the allowance of a discount would have

the effect of increasing the value of the award, without the benefit of legislative

sanction, to the extent that the payment exceeded the present value of future

payments. "7 Though financial principles underlying the value of money may be

undoubtedly tricky, the Hicks court unlocked the important policy reasons the

legislature included the word commute. Without discounting the present value

of a lump-sum payment, workers' compensation claimants are in actuality

receiving a greater benefit than that authorized by the AW.

      The importance of this particular language is highlighted by subsequent

decisions reflecting statutory changes throughout the course of the Workers'

Compensation Act's history. In 1987, the General Assembly removed the term

commute from the strictures of KRS 342.320. In Beale v. Wright, we were asked

to interpret this textual change.a We held that since the statute no longer

contained the word commute, the present-value-attorney-fee discount was no

longer applicable.

      In 1996, the legislature amended KRS 342.320 again to include language

that the fee may be deducted from the weekly benefits payable to the claimant

in equal installments "commuting sufficient sums to pay the fee." It thus re-

      6   405 S.W.2d 734, 735 (Ky. 1966).
      1   Id.
      a 801 S.W.3d 319 (Ky. 1990).

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adopted the term we interpreted in Hicks that is consistent with its legal

contextual definition. We conclude that the Board and the Court of Appeals

correctly determined that the plain text of the statute clearly includes the

ability to deduct present-value discounts for lump-sum payments effectuated

by discounting future benefits. Now we tum to CCMSl's calculation in the

present case.

   B. CCMSI Used the Correct Formula.
      In calculating Mullins's reduced weekly benefits, CCMSI followed the

formula found in 803 KAR 25:075, Section 1. This administrative regulation

exists to assist employers or insurance carriers making lump-sum attorney-fee

payments. This entails the following formula:

      (1) Employer weeks awarded - weeks paid = remaining weeks.
      (2) R weeks= P weeks (present worth).
      (3) EMP % Attorney fee/P weeks = Y rate.
      (4) R weeks x Y rate = employer attorney fee discount.
      (5) EMP attorney fee and discount - EMP attorney fee = EMP
          discount.
      (6) Weekly rate - Y rate = Employer reduced rate.

This appears also expressly to contemplate an attorney-fee discount or

reduction greater than the actual nominal amount of the fee sought because

the payment is made in a lump sum. CCMSI reached its calculated reduced

benefit by employing this formula:

      1. 425 week award period- 52 weeks already paid= 373
         remaining weeks.
      2. 373 remaining weeks= 341.4748 present-day weeks (per the
         2014 Present Worth Table published by the Department of
         Workers' Claims)                              ·
      3. $9,401.41 attorney fee/341.4748 present-day weeks= $27.53
         reduction per week

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      4. $218.89 weekly settlement rate - $27.53 per week reduction=
         $191.36 reduced weekly rate.

      But Mullins takes further issue with this formula. She theorizes that 803

KAR 25:075 only applies to claims involving the Special Fund as a party and

because the Special Fund no longer exists, the formula is inapplicable. This

entire argument is founded upon reference to the Special Fund in another

section of the regulation. We agree with the courts below that there is no

special significance to this reference, and this does not change the meaning of

Section 1-the formula CCMSI used-as an unrelated textual bystander. If our

analysis depended on an examination of Section 2, the presence of language

referencing the Special Fund would no doubt be puzzling. Fortunately, we do

not face that problem today.

      And for her final argument, Mullins contends that CCMSI is powerless to

make this calculation unilaterally and reduce her benefits itself. She contends

that the terms of her Form 110 Agreement completely control and the text

appearing in the four comers of the document does not authorize the present-

value discount. So she believes that CCMSI's calculating the discount on its

own amounts to a contractual breach. This contention quickly falls flat

because there is no reference to attorney's fees at all in the agreement. As

Leggett & Platt correctly highlight, the payment of attorney's fees, and the

concomitant present-value discount, are dictates of law. Mullins duty to pay

attorney fees approved by the AW is a statutory duty.

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      Because Mullins has failed to establish that CCMSI acted contrary to law

or failed to reduce correctly her weekly benefits, we hold her issues here have

no merit.

                                 III.   CONCLUSION.

      For the reasons stated above, we hereby affirm the Court of Appeals'

ruling.

      All sitting. All concur.

COUNSEL FOR APPELLANT:

Frank Jenkins III
Frank Jenkins Law Office

COUNSEL FOR APPELLEE: LEGGETT & PLATT

Frederick Allon Bailey
Patrick Joseph Murphy II
Casey, Bailey & Maines, PLLC

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