Adams v. Transamerica Insurance Group

609 P.2d 834, 45 Or. App. 769, 1980 Ore. App. LEXIS 2619

• Court: Court of Appeals of Oregon
• Decided: April 14, 1980
• Docket: 109639, CA 14373
• Status: Published

Opinions

BUTTLER, P. J.

In this action, an attorney, on his own behalf, seeks a judgment declaring the rights of the parties under a referee’s order approving a settlement for $27,500 of a purported "bona fide dispute over compensability of a claim” by a worker under ORS 656.289(4) of the Workers’ Compensation Act. The complaint alleged that the "own motion” order made by the Workers’ Compensation Board setting aside the settlement, together with its approval by the referee, as a release prohibited by ORS 656.236¹ was void. The prayer was for a determination that the settlement agreement was valid.

The complaint named as parties defendant Mr. Whitt, the worker, who had been represented by plaintiff as his attorney in the proceedings before the referee, and Transamerica Insurance Group, the insurance company for the worker’s former employer that paid the $27,500 to plaintiff and his client after approval of the settlement by the referee.

The answer filed by Whitt denied the allegations of the complaint and asked that it be dismissed. It also alleged as affirmative defenses that the settlement was a release prohibited by ORS 656.236 which was properly set aside by the Board and that the attorney’s fees in the sum of $6,875 charged by plaintiff and received by him from the $27,500 settlement exceeded the maximum of $4,000 permitted under the rules of the Board and should be "set aside without regard to the remainder of the claim.” The answer of Trans-america admitted the validity of the settlement and asked that it be approved. By counterclaim and cross-complaint, it asked for return of the $27,500 it paid to plaintiff and Whitt if the settlement were held to be invalid.

Plaintiff’s reply denied the affirmative defenses of defendant Whitt and also alleged that he had breached the settlement agreement by demanding repayment of the $6,750 in attorney’s fees, and prayed for judgment against defendant Whitt in that amount.

The court, after hearing testimony, entered a decree which "declared null and void” the Board’s order setting aside the order of the referee, and held that the referee properly approved the settlement as a "settlement of a bona fide dispute on the compensability of William R. Whitt’s workers’ compensation claim [under ORS 656.289(4)]” and "was not a release under ORS 656.236.” The decree also determined that the order of the Board was void because the Board "did not act within the time framework of ORS 656.289(3),” and "did not notify the parties of a right tó a hearing under ORS 656.278(3)” and "did not proceed under its own Board rules in acting on its own motion.”²

In addition, the decree awarded plaintiff $4,000 in attorney’s fees for services relating to the proceedings for approval of the settlement (in conformity with regulations by the Board), but held that it was "without jurisdiction over the matter of the additional $2,875 attorney’s fees received by” plaintiff.³ Defendant Whitt appeals.

At the outset, we note the unusual posture of this case as we view it. The purpose of plaintiff’s complaint is to declare that the Board acted without authority because the referee’s order became final after the expiration of 30 days from its entry, no appeal having been filed, ORS 656.289(3), and the Board was not authorized to act on its own motion because the five year period during which the claimant could file an aggravation claim under ORS 656.273 had not expired. (See ORS 656.278(2).)

We need not decide whether the Board had authority to act⁴ because the fact is that the Board did so by entering an order on its own motion (ORS 656.278(1)) and there was no appeal from that order to this court, which is the exclusive appellate tribunal from Board orders. ORS 656.298. The Board sent written notices to all of the parties (that is, claimant, the employer, its insurer) and also to counsel for all of them, including plaintiff, advising them of its concern that the settlement was a prohibited release and of its intention to review the settlement; it requested briefs on the issues presented. None was submitted. The Board’s order set aside the settlement⁵ contrary to the desire of the insurer. The insurer could have requested a hearing, but did not do so. As an aggrieved party, it could have, but did not appeal, and that order became final, ORS 656.295(8), as to it and the other parties.

Because plaintiff was not a party, ORS 656.005(22), he could not have appealed the Board order. Theoretically, then, plaintiff is the only one of the parties to this proceeding who might be able to challenge the Board order in an independent proceeding such as this. However, plaintiff was the attorney for defendant Whitt in negotiating and obtaining approval of the settlement agreement in question with respect to Whitt’s workers’ compensation claim. After the agreement was executed, Whitt had second thoughts and contended that the settlement agreement was void as a release prohibited by ORS 656.236(1) and, on his own, asked the Board to set it aside. After the Board determined that the settlement agreement was void as a prohibited release, plaintiff commenced this suit, the thrust of which is to require his former client, Whitt, to abide by the settlement agreement in order that plaintiff may retain his alleged entitlement to attorney fees based upon the amount of the settlement. To permit plaintiff to maintain this suit would be to permit an attorney to take action in direct conflict with the wishes of his former client and perhaps contrary to the best interests of that client to the sole advantage of the attorney.

ing has not been raised and under ordinary circumstances would be waived. However, we view the issue as one involving an overriding public policy, and because it appears on the face of the record we cannot ignore it. We hold that plaintiff does not have standing to maintain this action. Therefore, the circuit court should have dismissed it. Accordingly, we reverse and remand to the

1 ORS 656.236(1) provides:

"No release by a worker or his beneficiary of any rights under ORS 656.001 to 656.794 is valid.”

ORS 656.289(4) provides:

"Notwithstanding ORS 656.236, in any case where there is a bona fide dispute over compensability of a claim, the parties may, with the approval of a referee, the board or the court, by agreement make such disposition of the claim as is considered reasonable.”

2 ORS 656.289(3) provides:

"The order is final unless, within 30 days after the date on which a copy of the order is mailed to the parties, one of the parties requests a review by the board under ORS 656.295. When one party requests a review by the board, the other party or parties shall have the remainder of the 30-day period and in no case less than 10 days in which to request board review in the same manner. The 10-day requirement may carry the period of time allowed for requests for board reviews beyond the 30th day. The order shall contain a statement explaining the rights of the parties under this subsection and ORS 656.295.”

ORS 656.278(3) provides:

"The claimant has no right to a hearing, review or appeal on any order or award made by the board on its own motion, except when the order diminishes or terminates a former award or terminates medical or hospital care. The employer may request a hearing on an order which increases the award or grants additional medical or hospital care to the claimant.”

3 It appears from the record that the petition submitted by plaintiff to the referee requesting approval of the settlement of $27,500 did not state, either by amount or percentage, the attorney fees payable to plaintiff. It also appears that plaintiff’s contention that defendant Whitt had agreed to an attorney fee of 25 percent, or $6,875, was based upon his cashing of the check in the sum of $20,625 as delivered to him by the plaintiff after approval of the settlement by the referee.

4 We note, however, that ORS 656.278(1) purports to give the Board broad powers under its continuing jurisdiction over orders and awards. Whether the language of subsection (2) is intended to limit that authority or is intended to avoid the no right to a hearing provision of subsection (3), we need not decide here.

5 The record is clear that the dispute was not over "compensability,” which had been previously established, but was a dispute over the extent of Mr. Whitt’s present disability as the result of a difference in medical opinions -one doctor’s opinion being that Mr. Whitt, who had been found to be permanently and totally disabled (PTD) in 1974, was now "capable of physically performing work of a sedentary nature,” while another doctor’s opinion was that Mr. Whitt was still a PTD. See Schulz v. Compensation Department, 252 Or 211, 215, 448 P2d 551 (1968); cf. Seeber v. Marlette Homes, Inc., 30 Or App 233, 566 P2d 926 (1977); Greenwade v. SAIF, 41 Or App 697, 598 P2d 1265, rev den 288 Or 173 (1979). In fact, the "Joint Petition and Order of Dismissal of Hearing Upon Settlement of Bona Fide Dispute,” which constitutes the agreement in question, recites those very facts as being the basis of the dispute. Nowhere does that document state that there is a dispute as to compensability, although it recites that it is "being filed pursuant to ORS 656.289(4) authorizing reasonable disposition of disputed claims.” Although the agreement does not use the word "release,” it provides that upon its approval and "dismissal of the hearing, all claims which claimant has or may have against respondent * * * in connection with this claim * * * resulting from the injury of 12-11-74, for benefits under Oregon’s Workers’ Compensation Law are thereby and thereafter precluded * *

6 There may be circumstances where an attorney makes a settlement on behalf of his client reasonably believing that he has authority to do so, and so warrants to opposing counsel; if the client backs out claiming his attorney was not so authorized the attorney might reasonably claim an interest in compelling settlement if he could be held personally liable for the breach. That is not the case here.