Appeal by defendant from order entered 22 February 1999 by
Judge Zoro J. Guice, Jr., in McDowell County Superior Court. Heard
in the Court of Appeals 10 May 2000.
Donald Fred Coats for plaintiff-appellee Kimberly D. Biddix.
Young Moore and Henderson, P.A., by J. Aldean Webster, III,
and Kathryn H. Hill, for defendant-appellant Wal-Mart, Inc.
MARTIN, Judge.
Wal-Mart, Inc., (Wal-Mart) appeals from an order eliminating
its workers' compensation subrogation lien against the proceeds of
a settlement entered into between its employee, Kimberly D. Biddix(Biddix), and a third party. Biddix was injured in an automobile
collision, caused by the negligence of a third party, which
occurred in the course and scope of her employment with Wal-Mart.
Wal-Mart paid Biddix workers' compensation benefits, consisting of
medical benefits in the amount of $16,844.03 and temporary total
disability benefits in the amount of $1,874.40. Biddix
subsequently entered into a settlement with the insurer for the
third party tortfeasor for $25,000, the limits of liability under
the insurance policy. She petitioned the superior court to
exercise jurisdiction pursuant to G.S. § 97-10.2(j) to determine
the amount of Wal-Mart's subrogation lien and to distribute the
settlement amount.
At a hearing on her request, Biddix presented evidence that
she had suffered a broken femur, necessitating the insertion of a
metal rod into her leg; a fractured wrist; and emotional trauma.
She had returned to work as a stocker at Wal-Mart, but testified
that she was still experiencing extreme pain in her leg, was under
the care of a doctor, might need additional surgery to relieve her
pain, and intended to pursue additional workers' compensation
benefits from Wal-Mart. Wal-Mart presented no evidence, but was
permitted to file a written response in which it objected to any
reduction in the lien as being in excess of the superior court's
authority and a violation of its rights under the North Carolina
Constitution and the United States Constitution.
The trial court entered an order concluding that the
settlement did not adequately compensate Biddix for her injuriesand ordering the elimination of Wal-Mart's subrogation lien. Wal-
Mart appeals.
In its brief, Wal-Mart argues the superior court erred in
eliminating Wal-Mart's subrogation lien on the proceeds of the
third party settlement because the court had no authority to do so
and, even if such authority exists, the order was an abuse of
discretion under the circumstances of the case. Wal-Mart further
contends the elimination of the lien pursuant to G.S. § 97-10.2(j)
was a violation of its substantive and procedural due process
rights and its rights to equal protection of laws under the State
and Federal constitutions. For the following reasons, we affirm. Wal-Mart's challenges to G.S. § 97-10.2(j) as
unconstitutionally vague and violative of due process have been
previously rejected in
Allen v. Rupard, 100 N.C. App. 490, 397
S.E.2d 330 (1990). With respect to the remaining constitutional
challenges argued in Wal-Mart's responsive pleading, the record
discloses that Wal-Mart presented no evidence in support of those
contentions to the trial court during the hearing. Thus, such
issues are not preserved for appellate review and we will not
address them. N.C.R. App. P. 10(b)(1);
See State v. Fayetteville
St. Christian School, 299 N.C. 351, 359, 261 S.E.2d 908, 914 (1980)
(court will pass upon the constitutionality of a statute only when
the issue is squarely presented upon an adequate factual basis);
U.S. Fidelity and Guaranty Co. v. Johnson, 128 N.C. App. 520, 523,
495 S.E.2d 388, 390 (1998) (record must affirmatively show
constitutional issue was raised and passed upon by trial court).
Wal-Mart argues that it was free from culpability with respect
to the accident in which Biddix was injured and is therefore
entitled to a lien on the settlement proceeds in order to recoup
the payments which it made to Biddix. The employer's negligence,
however, becomes relevant only when the third party tortfeasor, in
the course of litigation with the injured employee, asserts that
the employer's negligence joined or concurred with the negligence
of the third party in causing the injury. N.C. Gen. Stat. § 97-
10.2(e) (1998). See
Wiggins v. Bushranger Fence Co., 126 N.C. App.
74, 483 S.E.2d 450,
disc. review denied, 346 N.C. 556, 488 S.E.2d
825 (1997) (employer's negligence is irrelevant to the question ofwhether the trial court abused its discretion under G.S. § 97-
10.2(j)).
The remaining issues are whether the superior court has the
authority to order that Wal-Mart will have no lien upon the
proceeds of Biddix's settlement with the third party tort-feasor,
and whether, in this case, it abused its discretion by doing so.
G.S. § 97-10.2(j) grants the superior court authority, in certain
instances, to determine the amount of the employer's subrogation
lien in funds obtained by an injured employee, who has been paid
workers' compensation benefits for the injury, from a third party
tortfeasor.
(See footnote 1)
As applicable here, the statute provides:
Notwithstanding any other subsection in
this section, in the event that a judgment is
obtained which is insufficient to compensate
the subrogation claim of the Workers'
Compensation Insurance Carrier,
or in the
event that a settlement has been agreed upon
by the employee and the third party, either
party may apply to the resident superior court
judge of the county in which the cause of
action arose, . . . (emphasis added).
. . .
[T]he judge shall determine,
in his
discretion, the amount,
if any, of the
employer's lien and the amount of cost of the
third-party litigation to be shared between
the employee and employer . . . (emphasis
added).
In this case, the event which triggers the authority of thesuperior court to allocate the amount of the lien or distribute
funds is the settlement, and there is no requirement that the
settlement amount be insufficient to compensate the workers'
compensation insurance carrier, as is the case when a judgment is
the triggering event.
In
Wiggins, v. Bushranger Fence Co., 126 N.C. App. 74, 483 S.E.2d
450
, we held that the superior court has discretionary authority,
pursuant to G.S. § 97-10.2(j), to reduce or eliminate an employer's
lien on the proceeds of an employee's settlement with a third
party. Thus, the only issue remaining is whether the superior
court abused its discretion in this case by allowing Wal-Mart no
lien upon the proceeds of Biddix's settlement.
Once a trial court properly assumes jurisdiction under G.S. §
97-10.2(j), it is vested with the discretion to determine how to
distribute the settlement proceeds. In
Allen v. Rupard, 100 N.C.
App. at 495, 397 S.E.2d at 333, this Court noted that the
discretion granted under G.S. § 97-10.2(j) is not unlimited; “the
trial court is to make a reasoned choice, a judicial value
judgment, which is factually supported . . . [by] findings of fact
and conclusions of law sufficient to provide for meaningful
appellate review.” Where the trial court makes sufficient findings
of fact and conclusions of law, the due process rights of the
employer have been protected.
Id. Although there is no
mathematical formula or list of factors for a trial court to employ
when making disbursement decisions, we are guided by precedent.
In
Allen v. Rupard, the employee was injured when the truck heoperated for his employer collided with anothe
r truck driven by
Stamy Rupard. The employee suffered three crushed vertebrae, and
underwent three operations requiring the insertion and removal of
hooks and rods in his back. Rupard's insurer paid the full amount
of his liability insurance, $25,000, after which the employee
petitioned the court for the distribution of these proceeds; the
court divided these proceeds in half. In its findings, the court
listed the injuries sustained by the employee, the extent to which
they would likely be permanent, the expenses paid by the employer's
carrier and the potential damages likely to be incurred, the
current and potential amount of the workers' compensation carrier's
subrogation lien, taking into account future payouts for medical
expenses, and the amount by which the settlement would be reduced
by currently owed attorney's fees. This Court concluded that
“considering the nature and circumstances of the incident, the
nature and extent of Plaintiff's injury, the fact that Plaintiff is
seeking no attorney fee to be paid out of the $25,000.00 proceeds
. . . and other circumstances in the case, . . . the Court finds
that it is fair, equitable, and just that one-half (1/2) of said
sum . . . be paid to [employee] and that the remaining one-half
(1/2) of said sum . . . be paid to . . . Employer and its insurance
carrier . . . .”
Id. at 496-97, 397 S.E.2d at 334. We held the
findings of fact and conclusions of law sufficient to permit
meaningful review and a determination that the trial court's
decision was “a reasoned choice which [was] factually supported.”
Id. at 497, 397 S.E.2d at 334. In
United States Fidelity and Guarantee Company v. Johnson,
128 N.C. App. 520, 495 S.E.2d 388, an employee died in an
automobile accident which occurred when he was driving his own
automobile on business for the Department of Transportation. His
widow received a settlement of $372,825 from the insurance company
of the driver who struck her husband; she then petitioned the
superior court to disburse these proceeds pursuant to G.S. § 97-
10.2(j). After finding the employee's age, his earnings, the
extent of his family, and the extent of his estate, the superior
court concluded that “fair compensation for the injuries and
damages received by . . . Executrix far exceed all forms of assets
available to compensate her including both liability coverage by
[third party's insurance carrier] and workers' compensation
benefits,” and “to allow the Department of Transportation to
recover the workers' compensation lien for funds paid to or to be
paid in this particular case would be inequitable under the
particular facts and circumstances of this case.”
Id. at 522, 495
S.E.2d at 390.
Similarly, in the present case, the superior court made
findings with respect to the extent of Biddix's injuries, her
ongoing pain and suffering, her medical expenses as paid by Wal-
Mart, her compensation for temporary disability, and the amount of
the settlement and the fact that the third party tortfeasor had no
additional assets from which she could recover. Based on those
facts, the court concluded that the amount of the settlement
inadequately compensated plaintiff for her injuries, and we cannotsay the conclusion is unreasonable. Thus, a reasoned choice would
exist to either reduce the lien by some amount or in its entirety.
The superior court's determination that the lien be reduced in its
entirety was factually supported and a proper, constitutional
exercise of its discretion. The order is
Affirmed.
Judges WYNN and SMITH concur.
Footnote: 1