PepsiCo, Inc. v. Sharp

1989 OK 114, 781 P.2d 814, 1989 Okla. LEXIS 135, 1989 WL 78285
CourtSupreme Court of Oklahoma
DecidedJuly 18, 1989
Docket71575, 71618
StatusPublished
Cited by10 cases

This text of 1989 OK 114 (PepsiCo, Inc. v. Sharp) is published on Counsel Stack Legal Research, covering Supreme Court of Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
PepsiCo, Inc. v. Sharp, 1989 OK 114, 781 P.2d 814, 1989 Okla. LEXIS 135, 1989 WL 78285 (Okla. 1989).

Opinions

HODGES, Justice.

This proceeding reviews an order of the Workers’ Compensation Court en banc which affirmed the trial tribunal’s order certifying Clinton Sharp’s (claimant) claim against his employer, Lee Way Motor Freight, Inc. (Lee Way), and added Pepsi-Co, Inc. (PepsiCo), as guarantor for payment of benefits following Lee Way’s default. In addition, claimant seeks review of a corrected order denying his request for attorney fees based on the “frivolity” of PepsiCo’s proceeding before the Workers’ Compensation Court en banc. The two proceedings are consolidated for the purpose of written opinion only.

Six issues are presented: (1) Does Pepsi-Co’s guaranty of Lee Way’s workers’ compensation liabilities make it a co-obligor for claims which arose during Lee Way’s own-risk employer period but were not awarded until after PepsiCo’s revocation of the agreement? (2) Did PepsiCo receive proper notice in this action so as to satisfy due process requirements and invoke the juris[816]*816diction of the Workers’ Compensation Court? (3) Did the Workers’ Compensation Court en banc have authority to add Pepsi-Co as a party respondent? (4) Was claimant’s action brought within the time allowed by the applicable statute of limitations? (5) Is the proper date for accrual of statutorily imposed interest on a workers’ compensation claim the date of the compensation award rather than the date a guarantor’s liability is invoked? (6) Did the Workers’ Compensation Court en banc correctly refuse to grant claimant’s request for attorney fees based on the “frivolity” of PepsiCo’s appeal? We answer all these questions in the affirmative and sustain both the order and the corrected order of the Workers’ Compensation Court en banc.

To understand the context of the issues in this appeal, certain background facts must be appreciated. Lee Way became a wholly-owned subsidiary of PepsiCo on August 18, 1976, and began operating as an own-risk employer.1 In early June, 1984, PepsiCo announced it had entered an agreement to sell Lee Way to Commercial Lovelace Motor Freight, Inc. (C & L). On June 8, 1984, the Administrator of the Workers’ Compensation Court informed Lee Way that, to continue its status as an own-risk employer, PepsiCo had thirty days to state in writing that it would be “fully responsible for any liabilities that Lee Way may incur under the Workers’ Compensation Act.”2 When no guaranty agreement was tendered, the court administrator revoked Lee Way’s own-risk permit on July 9, 1984. PepsiCo then submitted its agreement on July 27, 1984, which guaranteed Lee Way’s workers’ compensation liabilities and induced the administrator to withdraw the revocation of Lee Way’s own-risk permit. Lee Way was sold to C & L on August 6, 1984, and PepsiCo revoked its guaranty on August 29th.

After its sale, Lee Way ceased operations on November 17, 1984. Lee Way was then merged with C & L on February 27, 1985, to form Lee Way Holding Company. This corporate successor to Lee Way filed for chapter 11 bankruptcy reorganization on March 7, 1985.

At about the time Lee Way ceased operations, it also ceased payment of workers’ compensation benefits to injured employees. Workers began seeking enforcement of these benefits against PepsiCo as guarantor of Lee Way’s workers’ compensation liabilities. Proceedings before the Workers’ Compensation Court en banc, challenging trial tribunal decisions construing the guaranty, were stayed until the scope of PepsiCo’s guaranty was determined in hum v. Lee Way Motor Freight, Inc., 757 P.2d 810 (Okla.1987).

In the present proceeding, Sharp’s claim arose from a work-related back injury sustained on December 21, 1983, while- he was employed by Lee Way. He began receiving benefits from Lee Way on January 2, 1984, and filed a claim for compensation on the first day of March, 1984. On November 16,1984, claimant filed a form 9 Motion to Set for Hearing seeking to certify, for enforcement in district court, unpaid benefits against Lee Way as employer and against PepsiCo as guarantor. A hearing was originally set for January 22, 1985, but postponed in order to give PepsiCo notice.

At the February 25, 1985, hearing Pepsi-Co appeared represented by the same attorney who was representing Lee Way. The [817]*817parties agreed by stipulation to claimant’s injury, the applicable rates, and that benefits were owing from December 9, 1984. As the trial tribunal observed at the hearing, “the only real issue in this case is should this Order be written against Lee Way or against Lee Way and PepsiCo.” The tribunal’s order of March 26,1985, was written only .against Lee Way.

Lee Way filed a Notice of Appeal with the Workers’ Compensation Court en banc claiming the trial tribunal’s order was contrary to law and contrary to the evidence. All proceedings were then stayed until this Court’s decision in Lum was handed down on November 10, 1987. One week later, PepsiCo filed its “answer” naming itself as a “respondent”. Rehearing of the Lum decision was denied on June 21, 1988. The next day, claimant filed his motion to set the cause for hearing before the Workers’ Compensation Court en banc and to include PepsiCo as guarantor in a certification order.

After a hearing on July 29, 1988, the Workers’ Compensation Court en banc issued an order on August 2, 1988, adding PepsiCo as a party respondent guarantor based on the Lum decision. PepsiCo was also held responsible for interest from the date of the award against Lee Way. On August 5, 1988, a corrected order refused to grant claimant’s attorney fees based on the “frivolity” of PepsiCo’s appeal. The order and corrected order are the subjects of this proceeding.

I.

PepsiCo urges error in the court en banc’s holding that, based on the Lum decision, PepsiCo’s guaranty of Lee Way’s workers’ compensation liabilities makes it a co-obligor for claims arising during Lee Way’s own-risk permit but not awarded until after PepsiCo’s revocation of the agreement. We hold that the general principles of law stated in Lum govern the enforceability of PepsiCo’s guaranty and that the Workers’ Compensation Court properly held PepsiCo responsible for payment of those awards.

The Lum decision held that PepsiCo’s guaranty was given to satisfy Lee Way’s statutory liability for workers’ compensation awards by stepping into the shoes of its subsidiary. 757 P.2d at 817. Lum observed that “[o]ne who chooses to stand as a guarantor of an obligation defined by law may not be allowed to guarantee less than the full extent of the statutorily-imposed liability.” Id. at 816. PepsiCo was held to have “assume[d] the continuing obligation to pay awards granted during the life of [Lee Way’s own-risk] permit.” Id. at 819. This construction of the guaranty provided protection to workers “equivalent to that afforded employees covered by workers’ compensation insurance issued by independent insurance carriers.”3

PepsiCo now argues that Lum required payment only of awards granted during the life of Lee Way’s own risk permit, not claims based on injuries during that period which were not adjudicated until after Pep-siCo revoked its guaranty. This assertion clearly conflicts with Lum’s holding that PepsiCo stepped into Lee Way’s shoes and assumed its subsidiary’s own-risk obligations.

PepsiCo has misinterpreted Lum’s

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PepsiCo, Inc. v. Sharp
1989 OK 114 (Supreme Court of Oklahoma, 1989)

Cite This Page — Counsel Stack

Bluebook (online)
1989 OK 114, 781 P.2d 814, 1989 Okla. LEXIS 135, 1989 WL 78285, Counsel Stack Legal Research, https://law.counselstack.com/opinion/pepsico-inc-v-sharp-okla-1989.