Court Opinion

ID: 6787389
Source: CourtListenerOpinion
Date Created: 2022-07-21 01:04:58.785667+00
Date Added: 2024-06-11T16:02:58.063309
License: Public Domain

Alice Robie Resnick, J.
{¶ 1} This appeal involves the constitutionality of former R.C. 4123.93, which again became effective when we declared its successor, R.C. 4123.931, unconstitutional in Holeton v. Crouse Cartage Co. (2001), 92 Ohio St.3d 115, 748 N.E.2d 1111.
{¶ 2} On February 10, 1998, appellee, Gregory Modzelewski, received a number of injuries in the course of and arising from his employment with appellant, United Parcel Service, Inc. (“UPS”), a self-insured employer. Modzelewski’s injuries resulted from an accident in which Brian Howe, an employee of Yellow Freight Systems, Inc., backed a tractor-trailer into Modzelewski and pinned him against a loading dock. UPS certified Modzelewski’s workers’ compensation claim and has since paid compensation and benefits pursuant to R.C. Chapter 4123.
{¶ 3} On October 22, 1999, Modzelewski commenced this tort action by filing a complaint in the Summit County Court of Common Pleas against Howe and Yellow Freight, which he later dismissed and refiled on February 1, 2002, naming UPS as a necessary party to the extent that it “claims a subrogated interest in the subject matter of this lawsuit.” Modzelewski then moved for summary judgment against UPS, arguing that former R.C. 4123.93 contains the same constitutional infirmities as R.C. 4123.931 and, therefore, is invalid for the reasons stated in Holeton, supra. Finding that R.C. 4123.93 improperly distinguishes between claimants who institute lawsuits against third-party tortfeasors and claimants who settle their claims against tortfeasors without filing suit, the trial court granted Modzelewski’s motion for summary judgment. In a subsequent order, the court entered final judgment as to these parties upon an express determination that “there is no just cause for delay.”
*194{¶ 4} The court of appeals affirmed the judgment of the trial court, finding as follows:
{¶ 5} “After careful review of the record and the applicable law, this Court finds that former R.C. 4123.93 is unconstitutional. Former R.C. 4123.93, like R.C. 4123.931 treats claimants who litigate their claims against third-party tortfeasors differently from those who settle such claims out of court. R.C. 4123.931(D) unfairly deterred claimants from pursuing settlement over litigation because it stated that the entire amount of any settlement was unconditionally subject to subrogation, whereas a litigant could obtain a special verdict [or jury interrogatories] to protect the entire amount of [the] award from being subject to subrogation. Former R.C. 4123.93(D) unfairly deterred claimants from pursuing litigation over settlement because it stated that subrogation was automatic ‘only if the claimant was a party to litigation involving the third-party tortfeasor, with no mention of such in regard to settlements.” (Citations omitted.)
{¶ 6} The cause is now before this court pursuant to the acceptance of a discretionary appeal.
{¶ 7} The sole issue for our consideration is whether R.C. 4123.93, as enacted by Am.Sub.H.B. No. 107, effective October 20, 1993, 145 Ohio Laws, Part II, 3187, is unconstitutional.1
{¶ 8} As relevant here, R.C. 4123.93 provides:
{¶ 9} “(B) The administrator of workers’ compensation, for the amount of compensation and benefits paid to or on behalf of an employee from any [workers’ compensation] fund * * *, and a self-insuring employer, for the amount of compensation and benefits paid to or on behalf of his employee for any injury or occupational disease that is compensable under this chapter or Chapter 4121., 4127., or 4131. of the Revised Code, less the amount of reasonable attorney’s fees and court costs actually incurred by the employee in the action, are subrogated to *195all of the rights of that employee against a third-party tortfeasor involving that compensable injury or disease.
{¶ 10} “* * *
{¶ 11} “(D) The right of subrogation which inures to the benefit of the administrator, employer, or self-insuring employer under division (B) of this section is automatic and applies only if the employee is a party to an action involving the third-party tortfeasor.” 145 Ohio Laws, Part II, 3187.
{¶ 12} In Holeton, we held that R.C. 4123.931(D) violated Sections 2, 16, and 19, Article I of the Ohio Constitution, in part because it distinguished between claimants who try their tort claims and claimants who settle their tort claims. In the case where an award or judgment is rendered in the third-party action, R.C. 4123.931(D) permitted the claimant to save from subrogation those portions of his or her tort recovery that do not represent or duplicate workers’ compensation benefits. But where a settlement was reached with the third party, R.C. 4123.931(D) subjected the entire amount of the claimant’s tort recovery to the reimbursement right of the statutory subrogee. We found this framework unconstitutional because “it allows for reimbursement from proceeds that do not constitute a double recovery” for the settling claimant. Id., 92 Ohio St.3d at 126, 748 N.E.2d 1111. In particular, we explained that “[s]uch disparate treatment of claimants who settle their tort claims is irrational and arbitrary because * * * there are situations where claimants’ tort recovery is necessarily limited to amounts that if retained along with workers’ compensation cannot possibly result in a double recovery.” Id. at 132, 748 N.E.2d 1111.
{¶ 13} R.C. 4123.93(D) embodies a distinction similar to that of R.C. 4123.931(D), only it favors out-of-court settlement over litigation. Under R.C. 4123.93(D), claimants who institute lawsuits against third-party tortfeasors are treated differently from claimants who settle their third-party claims without filing suit, as only the former claimants’ tort recovery is subjected to the reimbursement right of the statutory subrogee.
{¶ 14} UPS argues, however, that this court did not find R.C. 4123.931 to be unconstitutional in Holeton “simply because claimants who tried their claims were treated differently than those who settled their claims. * * * In Holeton, it was the effect the statute had on those claimants who chose to settle their claims that made R.C. 4123.931 unconstitutional. * * * The statute operated whether or not a double recovery had occurred for those who settled their claims.” According to UPS, the government has a legitimate interest in “encouraging claimants to settle their claims without going through the time and expense of a trial.” UPS submits that R.C. 4123.93 does not allow for reimbursement from the claimant’s tort recovery “unless the injured worker has been fully compensated for his injuries and losses” and “a double recovery [has been] proven.” In this regard, *196UPS points out that contrary to Modzelewski’s assertions, the General Assembly has made the right to subrogation “automatic” in R.C. 4123.93(D) not to create “an irrebuttable presumption” of double recovery, but to prevent the claimant from filing a third-party suit “without informing the employer, thereby circumventing the employer’s rights.”
{¶ 15} We need not consider whether R.C. 4123.93 is unconstitutional solely because it tends to penalize those claimants who, due to no fault of their own, are unable to settle their third-party claims within the applicable statute of limitations. Nor is it necessary for us to determine whether R.C. 4123.93 implicates the fundamental right of access to courts, thereby invoking the so-called strict-scrutiny test. Under the rational-relationship test, and for the reasons stated in Holeton, R.C. 4123.93 is unconstitutional because it precludes claimants who are parties to actions against third-party tortfeasors from showing that their tort recovery or portions thereof do not duplicate their workers’ compensation recovery and, therefore, do not represent a double recovery.
{¶ 16} In reaching this conclusion, we fully agree with UPS that by making the right of subrogation “automatic” in R.C. 4123.93(D), the General Assembly meant only to qualify that right as self-executing. But automatic or not, the right of subrogation under R.C. 4123.93 cannot be construed to apply only when the claimant receives a double recovery. To the contrary, R.C. 4123.93(B) expressly provides that the subrogee, for the amount of compensation and benefits paid, is “subrogated to all of the rights of that employee against a third-party tortfeasor involving that compensable injury or disease.” (Emphasis added.)
{¶ 17} UPS proffers the First Appellate District’s decision in Moellman v. Niehaus (Feb. 5, 1999), 1st Dist. No. C-971113, 1999 WL 49370, as supporting the notion that R.C. 4123.93 can be interpreted to apply only when the claimant’s tort recovery is duplicative of workers’ compensation. In actuality, however, Moellman demonstrates just the opposite.
{¶ 18} In Moellman, the claimant filed a third-party suit and ultimately settled with the tortfeasor’s insurer for policy limits of $12,500. The claimant’s employer, who had paid more than $23,000 in workers’ compensation and medical benefits, intervened to protect its subrogation interest in the amount minus attorney fees and costs pursuant to R.C. 4123.93. The court of appeals held that a self-insured employer is not entitled to priority in the distribution of proceeds from the tortfeasor’s insurance policy when the policy limits are insufficient to fully compensate the claimant for his actual loss.
{¶ 19} In reaching its decision, however, the court in Moellman was constrained to acknowledge that “[t]he former statute [i.e., the version we review today] contains no * * * provision that would allow any damages to be excluded from the right of subrogation under any circumstances.” Nevertheless, the court *197found the statute inapplicable, relying on a case that held a contractual subrogation clause, which purported to apply under similar circumstances, to be against public policy and, therefore, unenforceable. Thus, Moellman did not interpret R.C. 4123.93 to apply only when the claimant receives a double recovery. To the contrary, the court specifically recognized that the statute applies when there is no double recovery and then went on to nullify its provisions.
{¶ 20} Accordingly, we hold that pursuant to Holeton, supra, R.C. 4123.93, as enacted by Am.Sub.H.B. No. 107, effective October 20, 1993, violates Sections 2, 16, and 19, Article I of the Ohio Constitution and, therefore, is unconstitutional.
{¶ 21} Based on the foregoing, the judgment of the court of appeals is affirmed.
Judgment affirmed.
F.E. Sweeney, J., concurs.
Moyer, C.J., and O’Connor, J., concur in judgment only.
Pfeifer, J., concurs in judgment only.
Lundberg Stratton and O’Donnell, JJ., dissent.

. When the 120th General Assembly enacted Am.Sub.H.B. No. 107, it added divisions (B), (C), and (D) to former R.C. 4123.93, forming Ohio’s first subrogation statute in the workers’ compensation context. The 121st General Assembly repealed former R.C. 4123.93 when it enacted R.C. 4123.931 as part of Am.Sub.H.B. No. 278, effective September 29, 1995. 146 Ohio Laws, Part II, 3581. In Holeton v. Crouse Cartage Co. (2001), 92 Ohio St.3d 115, 748 N.E.2d 1111, which was decided on June 27, 2001, this court held R.C. 4123.931 to be unconstitutional. As a result, former R.C. 4123.93 again became effective. See State v. Sullivan (2001), 90 Ohio St.3d 502, 739 N.E.2d 788, paragraph two of the syllabus. Following our decision in Holeton, the 124th General Assembly repealed existing R.C. 4123.93 and 4123.931 and enacted new versions of these subrogation statutes as part of Sub.S.B. No. 227. However, new R.C. 4123.93 and 4123.931 did not take effect until April 9, 2003. Accordingly, UPS’s subrogation rights in this case are governed by R.C. 4123.93 as enacted by Am.Sub.H.B. No. 107 in 1993. Throughout the remainder of this opinion, we will refer to this version of R.C. 4123.93 without the designation “former.”