Workers' Compensation_-elimination of lien--settlement not final
The superior court's order eliminating unnamed defendant insurance carrier's workers'
compensation lien is vacated, because: (1) the mediated settlement entered into by defendant
employer and plaintiff that was subject to a satisfactory resolution of the lien on those funds was
not final and does not constitute a settlement for the purposes of N.C.G.S. § 97-10.2(j); and (2)
the superior court does not have jurisdiction to adjust the amount of the lien when the terms of
the settlement agreement are contingent upon such adjustment.
The Law Offices of William Frank Maready, P.L.L.C., by William
F. Maready and George D. Humphrey, for plaintiff-appellee
Sandra O. Wilkerson, et. al.
Millberg, Gordon & Stewart, P.L.L.C., by John Millberg, for
defendant Norfolk Southern Railway Co.
Cranfill, Sumner & Hartzog, L.L.P., by Edward C. LeCarpentier,
III and F. Marshall Wall, for unnamed defendant-appellant
workers' compensation carrier Liberty Mutual Insurance Co.
ELMORE, Judge.
This appeal is by the unnamed defendant insurance carrier
alleging that the Durham County Superior Court did not have
jurisdiction to enter an order eliminating the carrier's workers'
compensation lien; erred in determining that a settlement had been
reached in the underlying case; and lacked jurisdiction to order
that workers' compensation payments continue until exhausted. For
the reasons stated herein, we vacate the order of the trial court. This appeal is rooted in the fatal accident of plaintiff's
husband. Johnnie Alan Wilkerson, decedent, was transporting cement
for his employer, Giant Cement of South Boston, Virginia (Giant),
when he was struck by an Amtrak train while crossing the tracks on
Plum Street in Durham, North Carolina. Since decedent was a
resident of Virginia, and acting within the scope of his employment
at the time of the accident, his wife, the administratrix of his
estate, filed for workers' compensation benefits under the Workers'
Compensation Act of the Commonwealth of Virginia. She also filed
suit in Durham County Superior Court against Norfolk Southern
Railway Company (Norfolk) alleging that the company was negligent
in maintaining the rail crossing at Plum Street.
As the workers' compensation insurance carrier for Giant,
Liberty Mutual (Liberty) began making payments consistent with
Virginia's workers' compensation laws. Pursuant to Virginia
statutory and case law entitling a carrier to reimbursement for
payments, Liberty filed and maintained a lien against any proceeds
from a recovery in plaintiff's action against Norfolk. Plaintiff
tentatively accepted a mediated settlement from Norfolk for
$400,000.00 subject to a satisfactory resolution of Liberty's lien
on those funds. Essentially plaintiff wanted to maximize the
amount of recovery from the settlement flowing directly to her and
have as few dollars as possible paid to Liberty via the
reimbursement lien. As such, plaintiff filed a motion in Durham
County Superior Court to have the lien either reduced or
eliminated. The trial court determined that it had proper
jurisdiction to handle the matter and entered an order eliminatingthe lien. It is from this order that Liberty appeals.
Liberty argues that the “settlement” entered into by Norfolk
and plaintiff is not final and does not constitute a settlement for
the purposes of N.C. Gen. Stat. § 97-10.2(j). We agree, and
therefore vacate the trial court's order eliminating the lien.
N.C. Gen. Stat. § 97-10.2(j) (2003) provides in part that:
Notwithstanding any other subsection in this
section, . . . 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, where the
injured employee resides or the presiding
judge before whom the cause of action is
pending, to determine the subrogation amount.
After notice to the employer and the insurance
carrier, after an opportunity to be heard by
all interested parties, and with or without
the consent of the employer, the judge shall
determine, in his discretion, the amount, if
any, of the employer's lien, whether based on
accrued or prospective workers' compensation
benefits, and the amount of cost of the
third-party litigation to be shared between
the employee and employer.
Id. Liberty cites Ales v. T.A. Loving Co., 163 N.C. App. 350, 593
S.E.2d 453 (2004), in support of its position. The Ales court
construed N.C. Gen. Stat. § 97-10.2(j) such that reaching a final
settlement between a third party and an employee is a
jurisdictional prerequisite to the judge being able to determine
whether an employer's lien should be modified or eliminated. Id.
In Ales, the third party and employee had reached a settlement
agreement, “contingent upon a waiver of the workers' compensation
lien.” Id. at 351, 593 S.E.2d at 454. The employee then made a
motion for elimination of the lien that was granted by the trial
court. On appeal, the employer argued that the settlement was notfinal and deprived the trial court of jurisdiction to eliminate the
lien. This Court framed the issue as: “whether N.C. Gen. Stat. §
97-10.2(j) provides the superior court with jurisdiction to adjust
the amount of a worker's compensation lien when the terms of the
settlement agreement are contingent upon such adjustment.” Id. at
352, 593 S.E.2d 454-55. The Court went on to hold that it does
not, since under contract law, the adjustment would be a condition
precedent to the settlement.
We interpret N.C. Gen. Stat. § 97-10.2(j) as
permitting the superior court to adjust the
amount of a subrogation lien if the agreement
between the parties has been finalized so that
only performance of the agreement is necessary
to bind the parties. An agreement containing
a condition precedent which must be fulfilled
before either party is bound to the contract
terms does not give the trial court
jurisdiction under N.C. Gen. Stat. § 97-
10.2(j).
Id. at 353, 593 S.E.2d at 455.
Although plaintiff maintains that Ales and the present case
are distinguishable, we cannot agree. Plaintiff and Norfolk did
reach a settlement, but it too was not final. Plaintiff's motion
to the superior court requesting that it extinguish the lien noted,
“[a]t the mediation, Plaintiff tentatively agreed to a settlement
of $400,000, expressly dependent upon an agreeable solution to the
Workers' Compensation subrogation.” Plaintiff also orally argued
to the superior court that “[a]fter a day of mediation we were able
to resolve the case tentatively, subject to a resolution of --
satisfactory resolution of the workers' compensation lien.” In its
order, the superior court determined as a finding of fact that
“[t]his settlement was made subject to resolution of the workers'compensation lien that the carrier has asserted,” and the concluded
that “plaintiff and the Third Party settled this case at the above-
mentioned mediation for the sum of $400,000.00 . . . subject to the
resolution of the claim of subrogation and lien by the carrier.”
All of this language suggests that had the judge not extinguished
the lien, there would be no settlement for $400,000.00 between
plaintiff and Norfolk, and the parties would return to the
negotiating table or trial; hence, a condition precedent.
Ales and this case are indistinguishable, and as such, Ales
controls our decision here. In the Matter of Appeal from Civil
Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 37 (1989) (“Where a
panel of the Court of Appeals has decided the same issue, albeit in
a different case, a subsequent panel of the same court is bound by
that precedent, unless it has been overturned by a higher court.”).
This Court's holding on the basis of Ales, however, perhaps
presents an unrecognized conflict.
On the one hand, as plaintiff argues, it is common practice
for employees and third parties to come to tentative settlement
agreements in which the only contingency is that of satisfactory
resolution of the workers' compensation lien. Yet, it is precisely
this contingency that Ales proscribes. Parties must be bound by
the superior court's decision, so long as it is not arbitrary.
See
Wood v. Weldon, 160 N.C. App. 697, 586 S.E.2d 801 (2003)
(employer's insurance carrier, employee, and third party bound by
an employee_third party settlement that placed a portion of the
proceeds in escrow to be paid either to carrier or employee
according to a subsequent superior court's modification orelimination of the workers' compensation lien). Allowing otherwise
would permit employees to compromise judicial efficiency by
proceeding to discount a superior court's decision if it goes
against them and renegotiating a settlement that provides the same
effect that they originally sought.
On the other hand, our decision may have an unintended
statutory effect. If, as the Ales court determined, a final
settlement is a prerequisite to petitioning a judge under
subsection (j), then the requirements of N.C. Gen. Stat. § 97-
10.2(h) still should govern the settlement. N.C. Gen. Stat. § 97-
10.2(h) (2003) reads, in pertinent part:
[i]n any . . . settlement with the third
party, every party to the claim for
compensation shall have a lien to the extent
of his interest under (f) hereof upon any
payment made by the third party by reason of
such injury or death, whether paid in
settlement, . . . and such lien may be
enforced against any person receiving such
funds. Neither the employee or his personal
representative nor the employer shall make any
settlement with or accept any payment from the
third party without the written consent of the
other and no release to or agreement with the
third party shall be valid or enforceable for
any purpose unless both employer and employee
or his personal representative join therein;
provided, that this sentence shall not apply:
. . .
(2) If either party follows the
provisions of subsection (j) of this
section.
Id. (emphasis added). Section 97-10.2(h) is the statutory
authority for the lien. And, it is clear that no release or
settlement is binding unless the employee, the employer, and the
third party all consent. So by its very nature, subsection (h)prevents a settlement from occurring without the consent of
everyone involved. The only way to settle a claim without the
consent of all the parties is to proceed under subsection (j),
which with the Ales decision is inapplicable absent a final
settlement before invoking the provision.
Interpreting the Ales decision, along with subsection (h),
seems to render litigants unable to get to (j) without a final
settlement and unable to settle without the consent of all parties.
It is clear from subsection (j) that the legislature did not intend
this cause and effect since subsection (j) makes the consent of the
employer (and hence the carrier, whose rights are subrogated from
the employer, see N.C. Gen. Stat. § 97-10.2(g)) irrelevant to a
decision by the judge to modify a lien that arises from a
settlement. N.C. Gen. Stat. § 97-10.2(j) (2003).
Thus, making “settlement” a jurisdictional issue and
determining that a settlement must leave nothing to chance, the
Ales decision has possibly added an unintended complication to
subsection (j). Nonetheless, this panel of the Court is bound by
our previous panel, and we accordingly vacate the superior court's
order eliminating the workers' compensation lien. As such, we do
not reach Liberty's other assignments of error.
Vacated and remanded.
Judges McGEE and McCULLOUGH concur.
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