Beaudrie v. Anchor Packing Co.

586 N.W.2d 96, 231 Mich. App. 242

• Court: Michigan Court of Appeals
• Decided: November 18, 1998
• Docket: Docket Nos. 196195, 196196, and 196197
• Status: Published

Opinion

Gage, P.J.

Plaintiffs in these consolidated appeals appeal as of right from circuit court orders modifying their prior consent judgments on remand from this Court. Beaudrie v Anchor Packing Co, 206 Mich App 245; 520 NW2d 716 (1994). We affirm.

Plaintiffs, the personal representatives of their spouse’s estates, each claimed that their spouses died of mesothelioma resulting from exposure to asbestos during the course of their employment. Before their spouses’ deaths, plaintiffs and the decedents had obtained worker’s compensation benefits from the decedents’ employers, appellees Johnson Controls, Ford Motor Company, and Detroit Edison Company. Plaintiffs later sued various manufacturers of asbestos who they alleged were responsible for their decedents’ injuries. The employers and appellee Silicosis, Dust Disease, and Logging Industry Compensation Fund (hereafter the dust fund), 1 which reimbursed the employers for a portion of plaintiffs’ worker’s compensation benefits, intervened and sought liens on plaintiffs’ potential recoveries from the asbestos manufacturers. 2

Plaintiffs obtained settlements from some of those manufacturers and entered into consent judgments. The circuit court entered orders permitting the dust fund and the employers to exercise their liens against the entire judgments. Plaintiffs appealed. In its prior Beaudrie opinion, this Court held that in a wrongful death action, a worker’s compensation carrier is entitled to reimbursement from the entire amount of the recovery awarded to an individual who is also a worker’s compensation beneficiary, regardless of the type of damages recovered. Id. at 249. Therefore, the Court remanded for the necessary modifications to the consent judgments. Id. at 249-250. Plaintiffs now contend that the circuit court erred in implementing this Court’s decision on remand.

i

MCL 418.827(1); MSA 17.237(827)(1) expressly permits an injured employee who is entitled to worker’s compensation benefits to also obtain damages from a third party. If such a third-party recovery occurs, however, the recovery must first be used to reimburse the employer or worker’s compensation insurer for worker’s compensation benefits paid. MCL 418.827(5); MSA 17.237(827)(5) grants an employer or its carrier a lien on any third-party recoveiy for the same injury for which worker’s compensation benefits have been paid. Subsection 827(5) provides in pertinent part:

Any recoveiy against the third party for damages resulting from personal injuries or death only, after deducting expenses of recovery, shall first reimburse the employer or carrier for any amounts paid or payable under this act to date of recovery and the balance shall immediately be paid to the employee or his or her dependents or personal representative and shall be treated as an advance payment by the employer on account of any future payments of compensation benefits.

When an employee is fatally injured and his dependents or personal representative file a wrongful death action, “any recovery” for damages resulting from the employee’s death is subject to the employer’s or carrier’s right of reimbursement even though those damages include an award for loss of society and companionship. Jones v McCullough, 227 Mich App 543, 546; 576 NW2d 698 (1998). The dust fund also has a statutory lien on a third-party recovery when the fund has reimbursed the employer for some or all of the expense of worker’s compensation payments. MCL 418.531(3); MSA 17.237(531)(3).

The worker’s compensation statute also takes into account the “expenses of recovery” in the third-party action and apportions those expenses “between the parties.” These expenses specifically include attorney fees. MCL 418.827(6); MSA 17.237(827)(6) provides:

Expenses of recovery shall be the reasonable expenditures, including attorney fees, incurred in effecting recovery. Attorney fees, unless otherwise agreed upon, shall be divided among the attorneys for the plaintiff as directed by the court. Expenses of recovery shall be apportioned by the court between the parties as their interests appear at the time of the recovery.

The obvious purpose of this apportionment is to make the employer or worker’s compensation carrier (and accordingly when appropriate the dust fund as well) pay a portion of the expenses connected with a third-party recovery, because the employer or carrier receives the benefit of the recovery by using it to pay the worker’s compensation obligation. This is consis tent with “one of the major purposes” of the legislative scheme, which is “to provide the opportunity for full recovery by each and thereby place the liability for the injury and the resulting cost upon the negligent party.” Franges v General Motors Corp, 404 Mich 590, 613; 274 NW2d 392 (1979). The formula for computing the apportionment of the costs of recovery is detailed in Franges, supra at 617-623.

We note that parties eligible to recover in a third-party action may not be eligible to recover in a worker’s compensation proceeding. Generally, those who can recover under the worker’s compensation statutes are the employee and the employee’s dependents. MCL 418.353; MSA 17.237(353). However, in a tort action, many people might recover for derivative injuries, including nondependent adult children and parents. In the present cases, a certain percentage of the recovery was allocated to the adult nondependent children of the deceased employees. 3

n

Plaintiffs first argue that the circuit court erred in finding that the dependency status of Eric Smith had not been previously adjudicated. They contend that the doctrine of res judicata bound the circuit court to its previous ruling that Eric was not his father’s dependent. We disagree.

In the original circuit court order, the court found that the liens of the employers and the dust fund “shall apply to all damages recovered including, but not limited to the damages for loss of society and companionship recovered by decedent’s adult, non-depend[e]nt children Tony Smith, Sharon Smith, the Estate of Eric Smith, Carrie Smith, Willie Mae Smith and Robin Smith Mayes.” This Court in its prior decision noted that the dust fund had conceded that its liens could attach only to recoveries by parties who are eligible for worker’s compensation benefits and therefore should not attach to recoveries by the decedents’ nondependent adult children. Beaudrie, supra at 249-250. However, the opinion did not consider which individuals were the decedents’ nondependent children. It was proper, therefore, for appellee to raise this issue in the circuit court on remand from this Court.

The dependency status of an individual for worker’s compensation purposes is a question of fact governed by the circumstances on the date of the employee’s injury. MCL 418.341; MSA 17.237(341). The circuit court did not hold evidentiary hearings regarding this issue before this Court’s remand because the depen dency status of the children was not relevant under the circuit court’s original orders and only became relevant after this Court’s decision. The listing that included Eric Smith with the other undisputedly non-dependent adult children did not therefore constitute an adjudication of Eric’s dependency status on the date of his father’s injury, and the circuit court did not err in so holding.

in

Next, plaintiffs contend that the circuit court erred in holding that appellees were not liable for a proportionate share of all expenses of the third-party recovery.

On remand to the circuit court, a controversy arose regarding how the expenses of the recovery should be apportioned among the parties under MCL 418.827(6); MSA 17.237(827)(6). The court ordered that

attorney fees and costs shall be excluded on a proportionate basis for any adult, non-dependent child who receives wrongful death benefits but who is not entitled to receive worker’s disability compensation benefits. The proportionate basis shall be the ratio that the share of the wrongful death benefit recovery awarded to any adult, non-dependent child who is not entitled to receive worker’s compensation benefits bears to the total wrongful death benefit recovery.

Plaintiffs base their challenge to this order on the last sentence of MCL 418.827(6); MSA 17.237(827)(6), which states that the expenses of recovery “shall be apportioned by the court between the parties as their interests appear at the time of the recovery.” Plaintiffs argue that the adult nondependent children of the decedents are not “parties” and therefore the circuit court erred in holding that appellees were not responsible for the expense of that portion of the recovery going to the nondependent children. We disagree.

In their argument, plaintiffs cite the wrongful death statute, which provides that all wrongful death actions “shall be brought by, and in the name of, the personal representative of the estate of the deceased person.” MCL 600.2922(2); MSA 27A.2922(2). Plaintiffs contend that the only “party” on the plaintiff’s side in a wrongful death action is the personal representative, and the beneficiaries of the action are therefore not “parties” within the meaning of MCL 418.827(6); MSA 17.237(827)(6). We find that plaintiffs’ interpretation of the statute fails to take into account the words “as their interests appear at the time of the recovery.” In construing a statute, a court should presume that every word has some meaning and should avoid any construction that would render any part of a statute surplusage or nugatory. Altman v Meridian Twp, 439 Mich 623, 635; 487 NW2d 155 (1992). As far as possible, effect should be given to every phrase, clause, and word. Jenkins v Great Lakes Steel Corp, 200 Mich App 202, 209; 503 NW2d 668 (1993). As the dust fund points out in its brief, those having an interest in a wrongful death action include not only the named parties but also beneficiaries, such as the adult children, and worker’s compensation lienholders, such as appellees. In order to give effect to every word of MCL 418.827(6); MSA 17.237(827)(6), all with a financial interest in the litigation must be included within the word “parties.”

Plaintiffs alternatively contend that “the parties” referred to in the statute are the parties to the worker’s compensation action, which by law would not include the employees’ nondependent adult children. However, this argument also fails because MCL 418.827(6); MSA 17.237(827)(6) plainly provides that the expenses of recovery shall be apportioned by “the court.” “[T]he clear language of the current statute bestows the responsibility for dividing attorney fees and apportioning the expenses of recovery between the parties on the court, not on the Bureau of Workers’ Disability Compensation.” Seay v Spartan Aggregate, Inc, 183 Mich App 46, 51; 454 NW2d 186 (1990).

Moreover, in order for the employee, the employer, and the insurer to have a “full recovery,” Franges, supra at 613, each party must pay the portion of expenses related to their respective recoveries. This Court’s prior opinion in this matter notes that the dust fund conceded that any recovery by a party who was not eligible for worker’s compensation benefits was not subject to an employer’s or insurer’s lien. Beaudrie, supra at 249. 4 Therefore, the dust fund’s reimbursement does not include amounts from the third-party recovery received by the adult children, who were not entitled to worker’s compensation benefits. Those amounts were therefore not considered in determining the appellees’ portions of the expenses of recovery. Although no published appellate decisions reach this exact issue, we agree with the circuit court’s decision given the unique facts of this case, including the dust fund’s concession that it was unable to reach the recoveries of the nondependent adult children. 5

rv

Plaintiffs next argue that the circuit court erred in holding that subsequent recoveries from asbestos manufacturers should invoke a recalculation of appellees’ rights as the lienholders. We disagree. MCL 418.827(5); MSA 17.237(827)(5) provides that an employer or insurer, or in this case the dust fund, is entitled to reimbursement from any recovery against a third party for damages resulting from personal injuries or death. It follows that the employer or insurer or the fund must also share in the expenses of every such recovery.

We are not persuaded by plaintiffs’ argument that the Supreme Court’s construction of MCL 418.827(5); MSA 17.237(827)(5) in Franges, supra, requires us to find that an employer is entitled to a single reimbursement of benefits paid. Franges discussed reim bursement rights in a situation involving a single tortfeasor and a single recovery. In the instant cases, plaintiffs filed against multiple tortfeasors and have acquired multiple recoveries. As the dust fund points out in its brief, if only the first recovery were used for a Franges calculation, there might be incentive for manipulation so that smaller recoveries came first, thus depriving the employer and insurer the opportunity for a “full recovery.” Franges, supra at 613. Therefore, unless the parties agree to some other resolution, the Franges formula must be repeatedly applied with each new recovery. The circuit court did not err in so ruling. 6

v

Next, plaintiffs argue that the circuit court erred in failing to award statutory interest on underpayment of benefits until the actual payment date. We find that the circuit court properly held that plaintiffs were entitled to statutory interest only from the date the payments were due until the date appellees offered to compensate plaintiffs for the underpayments out of the escrow account established by the circuit court. Any further delay in receiving the payments was the result of plaintiffs’ refusal to accept appellees’ offer, and plaintiffs should not be permitted to benefit from such refusal. See Chisholm v Chisholm Constr Co, 298 Mich 25, 29-31; 298 NW 390 (1941). Further, plaintiffs’ argument that the interest statute must be construed as a penalty against the employers is incor rect. The interest payment is not a penalty and is only intended to compensate a beneficiary for the loss of the use of the funds. McCaslin v General Motors Corp, 133 Mich App 782, 788; 349 NW2d 544 (1984).

VI

Finally, plaintiffs argue that Nelligan v Gibson Insulation Co, 193 Mich App 274; 483 NW2d 460 (1992), was wrongly decided. In Nelligan, this Court held that an employer could be reimbursed by the dust fund for out-of-pocket expenses in excess of the statutory threshold and that the dust fund was permitted to offset any recovery obtained by the employer from the employer’s expenditures. Id. at 281-282. The circuit court declined to address the propriety of this opinion, and we also so decline. Plaintiffs lack standing to raise this issue. Standing requires a demonstration that the plaintiff’s substantial interest will be detrimentally affected in a manner different from the citizenry at large. House Speaker v State Administrative Bd, 441 Mich 547, 554; 495 NW2d 539 (1993). The Nelligan holding involves obligations running between the employer and the dust fund. Plaintiffs have demonstrated no interest in the opinion different from the citizenry at large.

Affirmed.

1 This fund is properly known as the Silicosis, Dust Disease, and Logging Industry Compensation Fund. MCL 418.501(2); MSA 17.237(501)(2). The various fund misappellations appearing in the caption apparently arose in trial court pleadings.

2 The dust fund has assumed primary responsibility for the appeals of this litigation. The employers have not filed briefs with this Court.

3 In the original circuit court proceedings, the plaintiffs reached settlements with various of the defendant asbestos manufacturers. As part of the settlements, the personal representatives who were the widows of the deceased employees requested that certain percentages of the recoveries be allocated to their adult children. Mrs. Beaudrie requested that fifty percent of the recovery be divided equally among her four adult children, even though none of the children were dependent on the deceased. Mrs. Wright asked that 37-1/2 percent of the recovery go to the decedent’s adult son who had lived with his parents for thirty-six years but was capable of self-support. Mrs. Smith requested that twenty-eight percent of the recovery be divided among the decedent’s six adult children and one minor daughter. Defendants did not object to the allocation of the recovery to the adult children, and the circuit court’s consent judgments reflected these percentages.

In its prior cross-appeal, the dust fund argued that the percentages awarded to the nondependent adult children constituted an effort to circumvent the fund’s lien on the recovery and were not supported by the record. This Court ruled that by failing to cross-examine witnesses when it had the opportunity to do so and to object to the allocation of the pro ceeds among the interested parties, the dust fund had waived the issue. Beaudrie, supra at 250.

4 In this Court’s prior opinion, the panel declined to consider the merits of this issue in light of the dust fund’s concession. Beaudrie, supra at 249-250. We also so decline because the issue is not before us. However, we note that in Eddington Estate v Eppert Oil Co, 441 Mich 200; 490 NW2d 872 (1992), a plurality of the Supreme Court held that “the reimbursement to the employer or carrier appears to attach before the distribution of the proceeds to the personal representative and any subsequent distribution to those listed in [the wrongful death statute].” Id. at 215. “Nothing in [MCL 418.827(5); MSA 17.237(827)(5) ] requires, as a condition precedent, that a third-party tort-recovery recipient receive compensation benefits.” Id.

5 We also find support for this view in Schalk v Michigan Sewer Constr Co, 62 Mich App 658; 233 NW2d 825 (1975), which was reversed on other grounds by Franges, supra. In Schalk, the plaintiffs wife received $15,000 for loss of consortium out of a $125,000 third-party recovery. This amount was not considered part of the “gross recovery” that the worker’s compensation insurer’s lien could reach. The attorney’s fee that was apportioned between the parties was exactly one-third of $110,000, the portion of the recovery that benefited the insurer. It seems fair to assume that there were additional attorney fees associated with the $15,000 that were never considered in apportioning the expenses of recovery related to the parties to the worker’s compensation case. In other words, the portion of the attorney fee related to the recovery that did not benefit the worker’s compensation insurer was simply out of the picture.

6 The dust fund attempts to raise a separate argument that the formula presented in Franges, supra, is flawed. However, this issue is not properly before us because an appellee is limited to the issues raised by the appellant unless the appellee files a cross appeal. Barnell v Taubman Co, Inc, 203 Mich App 110, 123; 512 NW2d 13 (1993).