Court Opinion

ID: 9556732
Source: CourtListenerOpinion
Date Created: 2023-08-18 14:10:40.936313+00
Date Added: 2024-06-11T09:01:10.983254
License: Public Domain

IN THE COMMONWEALTH COURT OF PENNSYLVANIA

John Mercalde,                                :
                     Petitioner               :
                                              :   No. 221 C.D. 2022
              v.                              :
                                              :   Submitted: August 5, 2022
Borough of Swissvale and                      :
Employers’ Mutual Casualty                    :
Company (Workers’                             :
Compensation Appeal Board),                   :
                 Respondents                  :

BEFORE:       HONORABLE PATRICIA A. McCULLOUGH, Judge
              HONORABLE ELLEN CEISLER, Judge
              HONORABLE BONNIE BRIGANCE LEADBETTER, Senior Judge

OPINION NOT REPORTED

MEMORANDUM OPINION
BY JUDGE McCULLOUGH                                        FILED: August 18, 2023

              In this workers’ compensation (WC) case, Petitioner John Mercalde
(Claimant) seeks review of the February 9, 2022 Opinion and Order of the Workers’
Compensation Appeal Board (Board), which affirmed the January 29, 2021 Decision
and Order of Workers’ Compensation Judge John McTiernan (WCJ McTiernan).
WCJ McTiernan granted the Petition to Review Compensation Benefit Offset
(Review Petition) filed by Respondent Borough of Swissvale (Employer),1 in which
it sought to compel Claimant’s payment of certain subrogation amounts identified
in a Third-Party Settlement Agreement (TPSA). At issue in this appeal is whether
Employer may, pursuant to Section 319 of the Workers’ Compensation Act (WC

       1
          Employer’s WC insurer, Employers’ Mutual Casualty Company, also is a named
Respondent. Because they are represented by the same counsel and have submitted joint filings,
we refer to both together as “Employer.”
Act),2 77 P.S. § 671, subrogate against the balance of Claimant’s third-party
settlement by reducing future indemnity payments. Both WCJ McTiernan and the
Board concluded that it may do so. Upon review, we affirm.
                    I.     FACTS AND PROCEDURAL HISTORY
                The facts material to the issues presented in this appeal are not in
dispute. On October 24, 2017, Claimant was injured in a car accident while on duty
as a police officer for Employer. (WCJ McTiernan Findings of Fact (FOF) 1, 6;
Reproduced Record (R.R.) at 9a, 10a.)3 Employer issued a Notice of Compensation
Payable (NCP) on November 14, 2017, which described Claimant’s injuries as a
concussion, lumbar strain, and right elbow contusion.                  (FOF 1; R.R. at 9a.)
Employer issued amended and second amended NCPs on November 29, 2017, and
December 15, 2017, which described Claimant’s injuries as headaches/head
contusions, a lumbar strain, and a resolved right elbow contusion. (FOF 2; R.R. at
9a.) Claimant’s injuries later were adjudicated to also include facet arthropathy.
(FOF 5; R.R. at 9a.)
                In related civil proceedings against the third-party tortfeasor, Claimant
received a $250,000.00 settlement. (FOF 7; R.R. at 10a.) Claimant and Employer
thereafter executed a TPSA, dated April 3, 2020.                 Id.   The TPSA identifies
Claimant’s total third-party settlement of $250,000.00, Employer’s total accrued
subrogation lien of $68,112.68, and a net balance of Claimant’s settlement of
$181,887.32.        (R.R. at 98a.)      Box 7 of the TPSA identifies Employer’s net

       2
           Act of June 2, 1915, P.L. 736, as amended, 77 P.S. §§ 1-1041.4, 2501-2710.

       3
          In prior WC proceedings unrelated to this appeal, Workers’ Compensation Judge David
Torrey (WCJ Torrey) circulated a Decision and Order on June 30, 2020, in which he made findings
of fact and conclusions of law. (R.R. at 99a-109a.) WCJ Torrey’s findings and conclusions are
referenced and discussed, as necessary, in WCJ McTiernan’s decision.

                                                2
subrogation lien, after subtracting expenses, to be $50,505.99. Id. Box 8, titled
“Reimbursement rate on future compensation liability,” establishes a reimbursement
rate of 25.84%, and Box 9 provides that “[Employer] is responsible for 25.84[%] . .
. of any future weekly benefits and medical expenses to satisfy its obligation to
reimburse its pro rata share of [Claimant’s] fees and expenses until the subrogation
interest is exhausted; $181,887.32 . . . . Thereafter, [Employer] is responsible for
100[%] of any compensation liability.” Id. (underlining in original). Under the
heading “Further Matters Agreed Upon,” the parties agreed that “[Employer]
shall have no entitlement to subrogation interests beyond the amount set forth
in the [TPSA] ($50,505.99) consistent with the holding in [Whitmoyer v.
Workers’ Compensation Appeal Board (Mountain Country Meats), 186 A.3d 947
(Pa. 2018)].” Id. (emphasis added).
             Prior to executing the TPSA, counsel for both Employer and Claimant
engaged in e-mail correspondence to negotiate its terms. (R.R. at 65a-68a.) In
pertinent part, counsel discussed the fact that the Department of Labor and Industry,
Bureau of Workers’ Compensation’s (Bureau) LIBC-380 form (Form 380) had not
been updated since Whitmoyer was decided and that additional language would be
required to make the form compliant. Id. at 65a. Employer’s counsel concluded the
correspondence by sending Claimant’s counsel a revised Form 380 together with the
following comment:
             As I mentioned, [the Bureau] did not amend [Form 380]
             following the [Whitmoyer] decision, so I believe the
             proposed [f]orm is in full compliance with that decision.
             [Employer] will not reduce future medical payments, and
             [Claimant] would have the ability to file a [p]enalty
             [p]etition and/or [p]etition to [r]eview [m]edical
             [t]reatment and/or [b]illing if my client did so.

                                         3
Id. at 65a (emphasis added). After the parties executed the TPSA, Employer
continued to pay indemnity benefits to Claimant at the reduced 25.84% rate
identified in the TPSA. (R.R. at 60a-61a.) Claimant’s counsel in the related civil
proceedings placed $50,505.99 into an escrow account, which amount Claimant
believed would satisfy Employer’s entire subrogation interest under the TPSA. Id.
                 After Claimant’s counsel did not remit the payment, Employer filed the
Review Petition on July 24, 2020, seeking in relevant part to compel Claimant to
immediately pay the total amount of Employer’s net subrogation lien. (R.R. at 2a-
3a.)4 At the hearing on the Review Petition, Claimant’s counsel argued that the
TPSA provides that Employer’s total subrogation interest in Claimant’s third-party
settlement is $50,505.99. Id. at 44a. Employer’s counsel argued to the contrary that
Employer was entitled to both recover its net subrogation lien and subrogate against
the balance of Claimant’s third-party settlement by reducing future indemnity
payments. Id. at 44a-45a. By Decision and Order circulated on January 29, 2021,
WCJ McTiernan granted Employer’s Review Petition, finding that Employer did not
intend by executing the TPSA to voluntarily limit its total subrogation interest to the
amount of its net subrogation lien. (FOF 14, 15; R.R. at 11a, 12a.) WCJ McTiernan
concluded that the TPSA clearly contemplates that Employer would subrogate
against future payments of indemnity benefits and that the language added to the
TPSA by the parties under “Further Matters Agreed Upon” was only intended to

       4
           In the Review Petition, Employer alleged, in pertinent part, as follows:
                 On April 3, 2020, Claimant and his attorney voluntarily executed
                 [the TPSA]. As of June 2, 2020, Claimant has failed to remit to
                 [Employer] a check in the amount of $50,505.99, representing
                 [Employer’s] net [subrogation lien]. [Employer] requests an [o]rder
                 compelling Claimant, through his attorney, to [i]mmediately remit
                 the $50,505.99 check to [Employer].
(R.R. at 3a.)
                                                  4
bring it into compliance with Whitmoyer.                 (FOF 16-17; R.R. at 12a.)            WCJ
McTiernan accordingly ordered that Employer is entitled both to immediate receipt
of its net subrogation lien and to continue reducing future indemnity benefit
payments at the rate of 25.84% until the balance of Claimant’s third-party settlement
is exhausted. (WCJ McTiernan Order; R.R. at 14a.)
               Claimant appealed to the Board, which affirmed. (R.R. at 21a-31a.)
Claimant now seeks review in this Court.
                                II.      ISSUES ON APPEAL
               Claimant presents three issues for our review: (1) whether Employer’s
total subrogation interest is limited by agreement to $50,505.99 pursuant to the
TPSA; (2) whether Employer’s total subrogation interest is limited to $50,505.99
because Employer cannot subrogate against Claimant’s recovery for pain and
suffering; and (3) whether Employer’s total subrogation interest is limited to
$50,505.99 by the Due Process Clause of the Fourteenth Amendment to the United
States Constitution5 (Fourteenth Amendment).
                                      III.   DISCUSSION6
               Claimant first argues7 that Employer agreed in the TPSA to limit its
total subrogation interest in Claimant’s third-party settlement to the amount of its

       5
         The Due Process Clause provides that no state shall “deprive any person of life, liberty,
or property, without due process of law.” U.S. Const. amend. XIV, § 1.

       6
         Our “review is limited to determining whether constitutional rights were violated, whether
the adjudication is in accordance with the law[,] or whether necessary findings of fact are supported
by substantial evidence.” City of Philadelphia v. Workers’ Compensation Appeal Board
(Sherlock) 934 A.2d 156, 159 n.5 (Pa. Cmwlth. 2007).

       7
         Employer points out that Claimant filed his brief and Reproduced Record on May 26,
2022, two days past the filing deadline established by this Court. (Employer’s Br. at 3.) Employer
also points out that Claimant included in the Reproduced Record the brief he submitted to WCJ
(Footnote continued on next page…)
                                                 5
net subrogation lien, or $50,505.99. Both WCJ McTiernan and the Board rejected
this argument, and we likewise reject it here.
               Section 319 of the WC Act provides, in pertinent part, as follows:
               Where the compensable injury is caused in whole or in
               part by the act or omission of a third party, the employer
               shall be subrogated to the right of the employe[e], his
               personal representative, his estate or his dependents,
               against such third party to the extent of the compensation
               payable under this article by the employer; reasonable
               attorney’s fees and other proper disbursements incurred in
               obtaining a recovery or in effecting a compromise
               settlement shall be prorated between the employer and
               employe[e], his personal representative, his estate or his
               dependents. The employer shall pay that proportion of the
               attorney’s fees and other proper disbursements that the
               amount of compensation paid or payable at the time of
               recovery or settlement bears to the total recovery or
               settlement. Any recovery against such third person in
               excess of the compensation theretofore paid by the
               employer shall be paid forthwith to the employe[e], his
               personal representative, his estate or his dependents,
               and shall be treated as an advance payment by the
               employer on account of any future instal[l]ments of
               compensation.

77 P.S. § 671 (emphasis added). Thus, pursuant to Section 319, employers are
entitled to recover indemnity benefits and medical expenses paid up to the time of a
third-party settlement, usually in the form of a subrogation lien.                   Employers
thereafter may subrogate against the remaining balance of the third-party settlement
by reducing future indemnity benefit payments until the balance of the settlement is

McTiernan, which is not included in the Certified Record from the Board. Id. at 6 n.2. Although
we acknowledge these defects in Claimant’s filings, because we ultimately conclude that all of the
issues raised in Claimant’s appeal are without merit, we grant Employer no further relief on these
grounds.

                                                6
exhausted.    Whitmoyer, 186 A.3d at 954-55. “[Section 319] is clear and
unambiguous. It is written in mandatory terms and, by its terms, admits of no
express exceptions, equitable or otherwise. . . . [I]t does more than confer a ‘right’
of subrogation upon the employer; rather, subrogation is automatic.” Thompson v.
Workers’ Compensation Appeal Board (USF&G Co.), 781 A.2d 1146, 1151 (Pa.
2001). “[T]he rationale for this right of subrogation is threefold: to prevent double
recovery for the same injury by the claimant, to ensure that the employer is not
compelled to make compensation payments made necessary by the negligence of a
third party, and to prevent a third party from escaping liability for his negligence.”
Dale Manufacturing Co. v. Bressi, 421 A.2d 653, 654 (Pa. 1980).
             In Whitmoyer, the Pennsylvania Supreme Court considered whether an
employer, after having satisfied its subrogation interest accrued as of the time of a
third-party settlement, may also subrogate against the remaining balance of the
settlement by way of reduced payments of both future indemnity benefits and
medical expenses. 186 A.3d at 948-49. The Court in Whitmoyer concluded that,
although an employer may subrogate against the remaining balance of a claimant’s
third-party settlement by reducing future payments of indemnity benefits, it may not
reduce future payments of medical expenses:
             [A]fter satisfying the employer’s accrued subrogation lien,
             which encompasses “compensation” payments made by
             the employer toward both disability benefits and medical
             expenses prior to the third-party settlement, the General
             Assembly intended the excess recovery to be paid to the
             injured employee and to be treated as an advance payment
             only on account of any future disability benefits.

Id. at 957 (citation omitted). See also id. at 958 (“Therefore, having satisfied its
accrued subrogation lien at the time of settlement, an employer is not permitted to

                                          7
seek reimbursement for future medical expenses from the employee’s balance of
recovery.”).
               Here, Claimant argues that the language in the TPSA included under
the heading of “Further Matters Agreed Upon” evidences Employer’s intent to limit
its total subrogation interest to the amount of its net subrogation lien ($50,505.99)
and forgo any right to subrogate against future indemnity payments. On this issue,
WCJ McTiernan found as follows:
         [ ] Based upon the fact that [ ] Employer has filed [the Review
             Petition], it is clear that [ ] Employer did not intend to
             waive its subrogation interest on future payment of
             indemnity benefits. In point of fact, there would be no
             incentive for [ ] Employer to do so since [ ] Claimant
             received the full benefit available to him based on the
             coverage that was available. This is not an instance where
             [ ] Claimant compromised his third-party settlement based
             upon Employer[’s] representations that [it] would be
             compromising [its] subrogation interest on future benefits.

               Likewise, there has been no evidence offered by [ ]
               Claimant other than his “interpretation” of the language
               contained in the [TPSA] under “Further Matters Agreed
               Upon[.]” Claimant suggests that the language indicates an
               intent by [ ] Employer to limit its subrogation interest to a
               recovery in the amount of $50,505.99. This interpretation
               is contrary to the [e-mail] exchange between counsel prior
               to the execution of [the TPSA] on April 3, 2020, and is
               also contrary to the holding in Whitmoyer[,] which simply
               indicate[s] that future subrogation interests cannot be
               recovered on future medical expenses.

               ....

         [ ] While [the language under the heading “Further Matters
             Agreed Upon”] suggest[s] that [Employer shall have] “no
             entitlement to subrogation interests beyond the amount set

                                            8
             forth in the [TPSA],” this language is modified with the
             proviso that this would be consistent with the holding in
             Whitmoyer. Whitmoyer deals only with the subrogation on
             future medical expenses. The language also modifies the
             incorrect information contained in [Form 380]. If [ ]
             Employer had intended to waive its[] subrogation interest,
             there would have been no need to complete [Boxes] 8 and
             9 on the [TPSA] and no need to add any additional
             language under “Further Matters Agreed Upon[.]”

(FOF 15-17; R.R. at 12a) (finding designations removed).
             We agree with WCJ McTiernan’s analysis. Claimant attempts to isolate
the language under the heading “Further Matters Agreed Upon” from the rest of the
TPSA and counsel’s prior communications. As WCJ McTiernan correctly observed,
Boxes 8 and 9 of the TPSA are meaningful only if Employer in fact intended to
subrogate against future indemnity payments. Claimant’s proffered interpretation
of the TPSA, that Employer agreed to extinguish its right to do that very thing, would
render Boxes 8 and 9 meaningless. We will not interpret one provision of an
agreement in a manner that annuls another. See Lesko v. Frankford Hospital-Bucks
County, 15 A.3d 337, 342 (Pa. 2011). Further, it is clear from counsel’s
communications and the inclusion of a citation to the Whitmoyer decision in the
TPSA that the language under “Further Matters Agreed Upon” was intended chiefly
to conform the TPSA to Whitmoyer and preclude the reduction of future medical
expenses. For these reasons, we reject Claimant’s interpretation of the TPSA and
conclude that the Board did not err in affirming WCJ McTiernan’s determination
that Employer did not agree to limit its total subrogation interest to $50,505.99.
             Claimant next argues that, even assuming Employer did not agree in
the TPSA to limit its total subrogation interest to $50,505.99, Employer nevertheless
cannot recover against a third-party settlement that includes damages for pain and

                                          9
suffering. Claimant argues that, because Employer is not obligated to pay workers’
compensation benefits for pain and suffering, it should not be able to subrogate
against a settlement recovered by Claimant from a third party that include damages
paid for pain and suffering.
             First, we agree with Employer and the Board that Claimant introduced
no evidence before WCJ McTiernan indicating whether, or to what extent,
Claimant’s third-party settlement includes damages specifically designated as
compensation for pain and suffering. On that basis alone, Claimant’s argument is
meritless. See Board Op. at 4; R.R. at 26a. Second, even assuming that Claimant’s
third-party settlement includes designated damages for pain and suffering, that
designation will not, in itself, defeat an employer’s subrogation rights. In Thompson
v. Workers’ Compensation Appeal Board (USF & G Company), 801 A.2d 635 (Pa.
Cmwlth. 2002), we concluded that a specific designation of the type of damages paid
in a third-party settlement does not control whether an employer may subrogate
against it. Id. at 638 (concluding that “subrogation rights will not be affected by the
way in which the claimant and third-party tortfeasor, or the fact-finder in their action,
characterize the nature of the third-party recovery”) (quoting Cullen v. Pennsylvania
Property and Casualty Insurance Guaranty Association, 760 A.2d 1198, 1201 (Pa.
Cmwlth. 2000)).      We explained in Thompson, which involved a settlement
designated in part as compensation for “pain and suffering,” the public policy
rationale supporting this rule:
             [W]e find this result most consistent with public policy
             considerations. [An] employer is not a party to the tort suit.
             The structure of the tort settlement is in the sole control of
             the claimant and the tortfeasor unless, as frequently
             occurs, they reach out to [the] employer and obtain a
             compromise of the subrogation lien as part of an overall
             settlement. Presumably, if [a] claimant [was] to obtain a
                                           10
             full recovery in the tort action, he would be entitled to
             compensation for the full amount of his past and future lost
             wages . . . and medical expenses, as well as his pain and
             suffering, loss of life’s pleasures, [and other damages].
             Such a recovery would be ample both to satisfy [the]
             employer’s subrogation lien and to compensate [the]
             claimant for his intangible losses. If [the] claimant and the
             tortfeasor choose to settle the case, it is sound policy to
             encourage them to bring [the] employer into the process
             so that a settlement would reflect a genuine compromise
             of the rights of all interested parties. For the claimant and
             [the] tortfeasor to settle their suit on the basis that the
             tortfeasor pays only for [the] claimant’s pain and suffering
             is not a genuine compromise but merely a transparent
             effort to defeat [an employer’s] subrogation interest. To
             . . . adopt [the] claimant’s argument that simply by
             characterizing a tort recovery as solely for pain and
             suffering he can deprive his employer of its absolute
             statutory right to subrogation would encourage such
             behavior in derogation of the clear statutory scheme. We
             will not adopt such a rule.
Id. at 638-39 (citation and quotations omitted). Thus, and notwithstanding the fact
that Claimant has failed to support his argument with any evidence in the record,
Thompson controls our disposition of this issue. Claimant’s arguments fail.
             Claimant finally argues that Employer’s continued reduction of
indemnity payments as credits against his third-party settlement balance would
deprive him of property without due process in violation of the Fourteenth
Amendment. Employer contends first that this issue is waived because Claimant
fails to adequately develop it in his brief. Employer argues alternatively that, in any
event, Claimant’s argument lacks merit because an employer’s assertion of its
subrogation interest against a claimant’s third-party settlement does not violate due
process.

                                          11
            We agree with Employer that this issue is waived. Our Supreme Court
has explained that
            our rules of appellate procedure are explicit that the
            argument contained within a brief must contain “such
            discussion and citation of authorities as are deemed
            pertinent.” Pa. R.A.P. 2119(a). Where an appellate brief
            fails to provide any discussion of a claim with citation to
            relevant authority or fails to develop the issue in any other
            meaningful fashion capable of review, that claim is
            waived. It is not the obligation of an appellate court to
            formulate an appellant’s arguments for him.

Wirth v. Commonwealth, 95 A.3d 822, 837 (Pa. 2014) (some internal citations and
quotations omitted). Because Claimant devotes no more than three sentences to this
argument in his brief, we conclude that it is underdeveloped, unreviewable, and,
therefore, waived.
                              IV.   CONCLUSION
            Because we conclude that all issues raised by Claimant are either
without merit or are waived, we affirm the Board.

                                           ________________________________
                                           PATRICIA A. McCULLOUGH, Judge

Judge Fizzano Cannon did not participate in this decision.

                                         12
           IN THE COMMONWEALTH COURT OF PENNSYLVANIA

John Mercalde,                       :
                 Petitioner          :
                                     :
           v.                        :
                                     :    No. 221 C.D. 2022
Borough of Swissvale and             :
Employers’ Mutual Casualty           :
Company (Workers’                    :
Compensation Appeal Board),          :
                 Respondents         :

                                 ORDER

           AND NOW, this 18th day of August, 2023, the February 9, 2022 Order
of the Workers’ Compensation Appeal Board hereby is AFFIRMED.

                                         ________________________________
                                         PATRICIA A. McCULLOUGH, Judge