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HAWKINS v. COMMONWEALTH OF VIRGINIA/SOUTHSIDE VIRGINIA TRAINING CENTER


HAWKINS

v.

COMMONWEALTH OF
VIRGINIA/SOUTHSIDE VIRGINIA TRAINING CENTER


February 27, 1998
Record No. 971154

THELMA E. HAWKINS

v.

COMMONWEALTH OF VIRGINIA/
SOUTHSIDE VIRGINIA TRAINING CENTER

OPINION BY JUSTICE A. CHRISTIAN COMPTON
FROM THE CIRCUIT COURT OF THE CITY OF PETERSBURG

James F. D’Alton, Jr., Judge
Present: All the Justices


In this appeal, we construe Code ? 65.2-313, a statute added
in 1994 to the Virginia Workers’ Compensation Act, Code
?? 65.2-100 through -1310. We consider whether a circuit
court, and not the Workers’ Compensation Commission, in ruling
upon an employer’s petition for reimbursement of compensation
benefits paid, has jurisdiction to decide the amount of an
employee’s future benefits, when the employee has recovered from
a third-party tortfeasor a sum greater than the amount of the
past benefits.

On February 7, 1994, appellant Thelma E. Hawkins, the
employee, sustained a compensable back injury in an industrial
accident while working for the Commonwealth of Virginia at the
Southside Virginia Training Center located in Dinwiddie County.
She sustained a herniated cervical disk that damaged her spinal
cord. Pursuant to a memorandum of agreement between the employee
and the employer, the Commission entered an award under the Act
in December 1994 for payment of temporary total disability
benefits, the reasonable cost of medical care, and attorney’s
fees.

In February 1995, the employee filed an action for damages in
the court below against a number of physicians who
"attended" or treated her following the accident. She
alleged the defendants had been guilty of medical negligence for,
among other things, failing to timely diagnose and appropriately
treat the spinal cord injury that caused her present condition of
quadriplegia.

In July 1996, while the action was pending, the employer filed
the petition that generated the present dispute. Proceeding
pursuant to Code ? 65.2-310, the employer alleged that it had
paid "indemnification benefits" to the
plaintiff-employee pursuant to the Act and had "incurred
expenses for medical bills arising out of the incident which is
the subject of the [pending] action" totalling $229,150 on
the date the petition was filed. The employer further alleged
that it was entitled to recover the amount it had already paid
the plaintiff-employee, including both compensation benefits and
medical expenses, "should this case proceed to judgment for
the plaintiff or settlement."

The employer asked the court to enter an order requiring the
parties to "ascertain the amount of compensation paid and
expenses for medical, surgical and hospital attention and
supplies incurred by the employer" under the Act. The
employer also asked the court to require "the judgment
debtor to pay such compensation and expenses," less the
employer’s "share of expenses and attorney’s fees, so
ascertained by the court, out of the amount of the judgment"
or settlement, as provided in ? 65.2-310.

The malpractice action was settled for $850,000. In the August
1996 order dismissing the action, the court retained
"jurisdiction over the issue of the Employer’s lien herein
asserted." Reciting that the employee and the
Commonwealth-employer "dispute the validity of the asserted
lien and the amount thereof," the court ordered the sum of
$230,000 withheld from the settlement proceeds "until such
time as the issues relating to the amount, and extent, if any, of
any lien claimed by" the employer were resolved by the
court.

Upon consideration of deposition testimony, documentary
evidence, and argument of counsel, the trial court entered the
March 1997 order from which we awarded the employee this appeal.
The order provides: "[T]he Court finds that the
Commonwealth’s lien amounts to $127,948.00 for medical expenses
and the Commonwealth is not entitled to any lien for indemnity
paid through July 6, 1996. The Court finds that the
Commonwealth’s proportionate share of attorney’s fees and costs
is 31.7%." The order further provides that the employee
reimburse the Commonwealth the foregoing sum less $40,559.52 for
the Commonwealth’s proportionate share of attorney’s fees and
costs in the third-party action, for a net payment of $87,388.48.
On appeal, there is no dispute over these provisions.

The following sentence of the order is the subject of this
controversy: "The Court further finds that the Commonwealth
is entitled to a credit equivalent to 68.3% of (1) indemnity
benefits paid after August 27, 1996, and (2) a credit equivalent
to 68.3% of all medical expenses accrued after July 6, 1996,
until such time as these indemnity benefits and medical expenses
total $493,162.00."

On appeal, the employee presents the following questions.
First, "Where the employer’s petition sought a determination
under ? 65.2-310 of the amount of its lien based upon
$229,150.00 in payments through July 6, 1996, did the trial court
have jurisdiction to decide the worker’s continuing compensation
benefits arising after July 6, 1996 under" the Act?

Second, "Assuming the trial court had jurisdiction to
decide the claimant’s rights after July 6, 1996, did the
Commonwealth bear its burden of proving the extent to which
third-party medical negligence increased its indemnity
liability?"

Resolution of the first question is dispositive of this
appeal. Therefore, we shall not address further the second
question.

Several statutes within the Act are relevant here. Code
? 65.2-700 deals with the jurisdiction of the Workers’
Compensation Commission and specifies:

"All questions arising under this title, if not settled
by agreements of the parties interested therein with the approval
of the Commission, shall be determined by the Commission, except
as otherwise herein provided."

Code ? 65.2-310, under which the Commonwealth proceeded in
this case, furnishes protection to an employer when an employee
sues third parties and provides as pertinent:

"In any action by an employee . . . against any
person other than the employer, the court shall, on petition
. . . of the employer at any time prior to verdict, ascertain
the amount of compensation paid and expenses for medical,
surgical and hospital attention and supplies . . . incurred
by the employer under the provisions of this title and deduct
therefrom a proportionate share of such amounts as are paid
by the plaintiff for reasonable expenses and attorney’s fees
as provided in ? 65.2-311; and, in event of judgment against
such person other than the employer, the court shall in its
order require that the judgment debtor pay such compensation
and expenses of the employer, less said share of expenses and
attorney’s fees, so ascertained by the court out of the
amount of the judgment, so far as sufficient, and the
balance, if any, to the judgment creditor."

Code ? 65.2-311 apportions attorney’s fees and expenses
between the employer and employee in an action under ? 65.2-310
and provides as pertinent:

"In any action, or claim for damages, by an employee
. . . against any person other than the employer, . . . if a
recovery is effected, either by judgment or voluntary
settlement, the reasonable expenses and reasonable attorney’s
fees of such claimant[] shall be apportioned pro rata between
the employer and the employee . . . as their respective
interests may appear."

In 1994, the General Assembly adopted Code ? 65.2-313, the
statute that is at the center of this dispute. Acts 1994, ch.
586. As pertinent, the statute provides:

"In any action or claim for damages by an employee . . .
against any person other than the employer under ? 65.2-310, . .
. if a recovery is effected, the employer shall pay to the
employee a percentage of each further entitlement as it is
submitted equal to the ratio the total attorney’s fees and costs
bear to the total third-party recovery until such time as the
accrued post-recovery entitlement equals that sum which is the
difference between the gross recovery and the employer’s
compensation lien. In ordering payments under this section, the
Commission shall take into account any apportionment made
pursuant to ? 65.2-311.

For the purposes of this section, ‘entitlement‘ means
compensation and expenses for medical, surgical and hospital
attention and funeral expenses to which the claimant is entitled
under the provisions of this title, which entitlements are
related to the injury for which the third-party recovery was
effected."

On appeal, the Attorney General, urging affirmance, refers to
? 65.2-313 and notes it applies to "any action" under
? 65.2-310. Thus, he argues, because the matter was pending
in the circuit court upon the employer’s petition, "there
can be no question that this matter arose in an action under ?
65.2-310," and that the circuit court had jurisdiction.

The Attorney General insists that "the plain
language" of ?? 65.2-310 and -313 does not limit a
circuit court’s authority "to considering only those events
occurring on or before the date of the petition." He points
out that ? 65.2-310 states "the court shall" ascertain
the amount of "compensation paid" and "expenses .
. . incurred." He says this language shows "a circuit
court’s jurisdiction is continuing in nature, encompassing all
compensation paid and expenses incurred" under the Act.

Continuing, the Attorney General contends the second sentence
of ? 65.2-313 additionally "provides direction to the
Commission, requiring that when the Commission is ordering
payments under ? 65.2-313, it shall follow the apportionment
previously made pursuant to ? 65.2-311." He maintains that
if the General Assembly meant the Commission to have exclusive
jurisdiction "for such determinations," the first
sentence of ? 65.2-313 "would have explicitly stated
‘the Commission shall,’ as was done in the second sentence."

We do not agree with the Attorney General. Before we proceed
to construe ? 65.2-313, we shall review the state of the law,
relevant to the issue presented, at the time of the statute’s
1994 enactment.

In Circuit City Stores, Inc. v. Bower, 243 Va.
183, 413 S.E.2d 55 (1992), this Court upheld a trial court’s
apportionment of attorney’s fees and expenses under the Act with
respect to a death claim when the employee had recovered from
third-party tortfeasors. The Court stated that former Code
? 65.1-42 (now ? 65.2-310) "requires the trial court
to consider only amounts actually paid by the employer in fixing
the amount of the employer’s lien," but that the statute
"does not restrict the trial court’s consideration to
amounts actually paid in apportioning the attorney’s fees." Id.
at 188, 413 S.E.2d at 57. Thus, the Court approved apportionment
of attorney’s fees and expenses based on the entire amount of a
fixed 500-week award.

In Bohle v. Henrico County Sch. Bd., 246 Va. 30,
431 S.E.2d 36 (1993), the Court considered the method to be used
for apportioning attorney’s fees and expenses under the Act when
payment of compensation benefits to an injured employee had been
suspended following a settlement between the employee and a
third-party tortfeasor. The Court adopted the approach used by
the Commission, that is, "once the employee’s net
third-party recovery is determined, the employee will be entitled
to payment of no further compensation or medical expenses
subsequent to the date fixed in the suspension order until the
employee can establish that further benefit entitlements exceed
the net amount received by the employee from the third-party
recovery." Id. at 35, 431 S.E.2d at 39. We said,
however, that "the Commission has not foreclosed the payment
of attorney’s fees in increments as medical expenses and
compensation benefits accrue during the suspension period." Id.

Against this background and addressing the interests of
employees and employers following a third-party recovery, the
1994 General Assembly acted by adopting legislation codified as
? 65.2-313.

The Act (introduced as House Bill 1279) is not a model of
clarity. For an article describing the drafting of House Bill
1279, see Louis D. Snesil, Prorating the Costs of a
Third-Party Recovery
, The Journal of the Virginia Trial
Lawyers Association, Summer 1994, at 26, 28 ("The final
version of this statute was hammered out hurriedly by
representatives of the compensation carriers and VTLA during a
subcommittee meeting of the Senate Commerce and Labor
Committee").

Thus, in construing the act we shall look first to its title.
A title may be read in an attempt to ascertain an act’s purpose,
though it is no part of the act itself. Miller v. Commonwealth,
180 Va. 36, 41, 21 S.E.2d 721, 723 (1942). The title reads:
"An Act to amend the Code of Virginia by adding in Chapter 3
of Title 65.2 a section numbered 65.2-313, relating to workers’
compensation; suspension of benefits following recovery from
third party." Acts 1994, ch. 586.

Considering the title of the act together with the text of the
statute, we conclude that ? 65.2-313 contemplates a situation
where there has been a suspension of benefits, as in Bohle,
after the employee has recovered from a third-party tortfeasor a
sum larger than the total of the past payments of benefits. We
cannot determine from this record whether benefits have been
suspended in this case. Nevertheless, that circumstance does not
materially impact the jurisdictional question.

Turning to the statute, we note that nowhere is the word
"court" used. Nonetheless, the legislature clearly
intended for a circuit court to have jurisdiction because the
opening clause refers to an "action" under ? 65.2-310,
which does authorize "the court" to proceed. The
crucial issue then becomes: How far does the court’s jurisdiction
extend under ? 65.2-313?

We hold that the circuit court’s jurisdiction extends only to
the point where it determines the amount of compensation
benefits, as opposed to attorney’s fees and costs, actually paid
by the employer. This is confirmed by use of the past tense in ?
65.2-310, "incurred by the employer," and by this
Court’s statement in Bower that the predecessor to
? 65.2-310 "requires the trial court to consider only
amounts actually paid by the employer in fixing the amount of the
employer’s lien." 243 Va. at 188, 413 S.E.2d at 57.

We further hold that ? 65.2-313 permits the circuit court to
apportion attorney’s fees and costs based on the amount of
benefits paid in the past, and benefits to be paid in the future
until, in the language of ? 65.2-313, "the accrued
post-recovery entitlement equals that sum which is the difference
between the gross recovery and the employer’s compensation
lien." This is consistent with the Court’s statement in Bower
that the precedessor to ? 65.2-310 "does not restrict the
trial court’s consideration to amounts actually paid in
apportioning the attorney’s fees." 243 Va. at 188, 413
S.E.2d at 57.

This construction comports with the structure of
? 65.2-313, which, in the first sentence, sets forth the
formula for computing the amount the employer "shall
pay," and refers, in the second sentence, to the Commission
"ordering payments" – the court sets the apportionment
percentage and the Commission orders the amount of the future
payments taking "into account" the apportionment
percentage.

Stated differently, and incorporating the statutory language,
the employer is liable for payment "of each further
entitlement as it is submitted" based upon a percentage
"equal to the ratio the total attorney’s fees and costs bear
to the total third-party recovery" until the time when
"the accrued post-recovery entitlement equals that sum which
is the difference between the gross recovery and the employer’s
compensation lien." When the circuit court has fixed that
percentage and has determined the amount of the lien for payment
of past benefits, the Commission enters the picture and orders
the appropriate payments to be made, taking into account the
apportionment percentage fixed by the court. See Eghbal
v. Boston Coach Corp., 23 Va. App. 634, 638-39, 478 S.E.2d
732, 734-35 (1996) (summary of Commission’s manner of calculation
of offset due employer under ? 65.2-313).

Our conclusion is buttressed by the provisions of Code
? 65.2-700 granting jurisdiction to the Commission over all
questions arising under the Act, "except as otherwise herein
provided." We do not believe ? 65.2-313 plainly provides
"otherwise" as to future payments.

Turning to the order that is the subject of this appeal, we
shall apply the foregoing analysis. In the order, the trial court
fixed the amount of the Commonwealth’s lien for medical expenses,
determined the Commonwealth was not entitled to any lien for past
compensation, and set the proportionate share of attorney’s fees
and costs at a fixed percentage. The trial court acted within its
jurisdiction in making these rulings, and they are not contested
on appeal.

However, the court improperly undertook to apply the
apportionment percentage to compensation benefits to be paid and
medical expenses to be incurred in the future "until such
time as these indemnity benefits and medical expenses total
$493,162.00." (This figure apparently equals a sum that is
the difference between the gross third-party recovery and the
employer’s lien on the amount of the recovery.) This was beyond
the court’s jurisdiction and was error, for the reasons that we
have articulated.

Accordingly, the order from which this appeal is taken will be
affirmed, in part, and reversed, in part. We will modify the
order by striking the contested third sentence of the second
paragraph of the order, and will enter final judgment upon the
order as modified.

Affirmed in part,
reversed in part,
modified, and final judgment.

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