2014 VT 24


Bonanno v. Verizon Business Network Systems and Sedgwick
Claims Management Systems (2012-261)
 
2014 VT 24
 
[Filed 28-Feb-2014]
 
NOTICE:  This opinion is subject
to motions for reargument under V.R.A.P. 40 as well as formal revision before
publication in the Vermont Reports.  Readers are requested to notify the
Reporter of Decisions by email at: JUD.Reporter@state.vt.us or by mail at: Vermont
Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801, of any errors
in order that corrections may be made before this opinion goes to press.
 
 

2014 VT 24

 

No. 2012-261

 

Nicholas Bonanno


Supreme Court


 


 


 


On Appeal from


     v.


Superior Court, Chittenden Unit,


 


Civil Division


 


 


Verizon Business Network Systems
  and 
Sedgwick Claims Management Systems


April Term, 2013


 


 


 


 


Brian
  J. Grearson, J.


 

Christopher McVeigh of McVeigh ¨ Skiff, Burlington, for Plaintiff-Appellant.
 
J. Christopher Callahan and Brendan P. Donahue of Brady
& Callahan, P.C., Springfield, for
  Defendants-Appellees.
 
 
PRESENT:  Reiber, C.J., Dooley, Skoglund, Burgess and Robinson,
JJ.
 
 
¶ 1.            
REIBER, C.J.   Plaintiff Nicholas Bonnano appeals from the
superior court’s grant of summary judgment against him and in favor of his
employer, Verizon, and Verizon’s third-party claims administrator, Sedgwick
Claims Management.  Plaintiff’s claims stem from an alleged breach of a
settlement agreement with employer regarding his workers’ compensation claim. 
On appeal, plaintiff argues that the trial court erred because there was a
dispute of material fact as to the voluntariness of employer’s temporary total disability
(TTD) payments made to plaintiff after the TTD termination date indicated in
the settlement.  Plaintiff also contends that the trial court abused its
discretion by awarding inadequate attorneys’ fees.  Employer cross-appeals and
argues that the trial court abused in its discretion by awarding any attorneys’
fees.  We affirm the trial court in all respects. 
¶ 2.            
The factual context for this case is somewhat convoluted.  Plaintiff was
employed by employer Verizon when he suffered spinal cord injuries during a
series of three car accidents.  Litigation commenced when employer contested
the necessity of a surgery proposed by plaintiff, and the Department of Labor ruled
in plaintiff’s favor, requiring employer to pay for plaintiff’s surgery.  N.B.
v. Verizon, Op. No. 24-08WC (June 12, 2008), http://www.labor.vermont.gov/portals/0/WC/BonnanoDecisionGB.pdf.
Plaintiff experienced complications from the surgery that necessitated lifetime
care, including deep vein thrombosis and postphlebitic syndrome.  Employer
appealed the Department’s ruling to the superior court.  The parties reached a
settlement before trial, although the parties dispute exactly when they reached
agreement.  What is certain, however, is that the Department approved the
settlement on July 13, 2010, after receiving a statement from plaintiff
explaining that the settlement was in his best interest and requesting the
Department’s approval. 
¶ 3.            
The provisions of the approved “Form 15” settlement agreement relevant
to the instant case included: (1) a lump sum payment of $230,000 to be paid
within fifteen days of the Department’s approval of the settlement; (2) payment
of continued TTD benefits through May 1, 2010; and (3) payment of plaintiff’s
“regular medical benefits” until thirty days after federal approval of the
submitted Medicare Set Aside Trust. 
¶ 4.            
In July 2010, employer issued plaintiff a check for $216,990.28.  In
response to plaintiff’s inquiry as to why the check did not reflect the full
amount of the agreed-upon settlement, employer explained that it had taken a
credit for TTD payments made after May 1, 2010.  Plaintiff disputed the amount
of the credit.  Plaintiff also disputed employer’s refusal, through its
third-party administrator, to pay a medical bill resulting from a doctor’s
visit on May 25, 2010.  Third-party administrator’s claims adjuster maintained
that the visit was not related to plaintiff’s work injury.  
¶ 5.            
On October 15, 2010, plaintiff brought the current suit against both employer
and third-party administrator to enforce the terms of the settlement
agreement.  Plaintiff claimed that defendants improperly took a credit by
subtracting the TTD payments made after May 1, 2010 from the lump sum payment,
miscalculated the amount of the credit, and wrongfully denied plaintiff’s
medical bill.  As to the credit calculation claim, employer conceded error and
issued two checks amounting to the miscalculation plus interest.  Employer
continued to maintain, however, that it was entitled to a credit for the post-May
1 TTD payments.  Regarding the May 25, 2010 doctor’s appointment, defendants
submitted, and the court granted, a motion to compel plaintiff to provide
expert disclosure.  After plaintiff submitted the disclosure, defendants issued
payment for the medical bill according to the workers’ compensation fee
schedule.   
¶ 6.            
Defendants moved for summary judgment, which the trial court granted.  The
court concluded that although “[t]he settlement agreement itself makes no
provision for the treatment of disability payments made after May 1, 2010,” the
agreement did call for a total payment of $230,000 and TTD payments
until May 1, 2010, which is precisely what plaintiff received.  The court
rejected plaintiff’s argument that the post-May 1, 2010 payments were voluntary
because employer was required to continue making TTD payments under Vermont
Workers’ Compensation Rule 18.110 until a Notice of Intention to Discontinue
Payments, or Form 27, was filed to terminate the TTD benefits.  Since the Form
27 was never filed, and probably would not have been approved by the Department
while the settlement was still pending, employer could not be considered a
volunteer.  To hold otherwise, the court reasoned, would give plaintiff a
windfall.  The court held that the other issues raised by the parties,
including third-party administrator’s liability, the payment of the medical bill,
and the calculation of the credit, were moot.  
¶ 7.            
Plaintiff moved the court to reconsider its ruling and for attorneys’
fees.  The court denied the motion to reconsider, finding no issues of disputed
fact and no reason to disturb its legal conclusions.  As to the attorneys’
fees, the court concluded that plaintiff had prevailed on his claim relating to
the medical bill, and thus his attorney was entitled to an award under 21
V.S.A. § 675(a).  However, the court found that several factors “weigh[ed]
heavily” against a large award.  These included the peripheral nature of the
medical bill issue, plaintiff’s refusal to provide the relevant discovery until
ordered by the court, and defendants’ agreement to pay the bill once it
received the discovery.  Noting that “the results in this case unquestionably
favor [defendants],” the court awarded $1000.00 in fees and $250.00 in costs
for the expert witness.     
I.
¶ 8.            
Plaintiff first argues that the trial court erred in granting summary
judgment for defendants.  We review a grant of summary judgment de novo.  Ianelli
v. U.S. Bank, 2010 VT 34, ¶ 7, 187 Vt. 644, 996 A.2d 722.  Summary
judgment is proper when there is no dispute of material fact and the movant is
entitled to judgment as a matter of law.  Id.; V.R.C.P. 56(a).  The nonmoving
party is entitled to “the benefit of all reasonable
doubts and inferences.”  Ianelli, 2010 VT 34, ¶ 7 (quotation
omitted).
¶ 9.            
The crux of plaintiff’s argument is that defendants’ claims adjuster
could have chosen to file a Form 27 to terminate TTD payments after May 1, 2010¾the date of TTD benefits termination
indicated in the proposed settlement agreement.  Therefore, plaintiff contends,
employer’s continued TTD payments were voluntary, and employer’s decision to
treat the continued payments as an advance on the settlement deprived plaintiff
of the lump sum payment he was entitled to under the plain language of the
agreement.[1] 
In the alternative, plaintiff argues that the voluntariness of the TTD payment
is a question of fact that should be submitted to the jury.     
¶ 10.        
In the context of workers’ compensation insurance, an employer’s payment
is considered voluntary if made “while under no obligation to pay or when no
interest of [employer’s was] protected by payment.”  Norfolk & Dedham
Fire Ins. Co. v. Aetna Cas. & Sur. Co., 132 Vt. 341, 344, 318 A.2d 659,
661 (1974).  This Court “determine[s] voluntariness on the basis of the
equities rather than any strict rule.”  Id. at 345, 318 A.2d at 662. 
Because the law encourages subrogation and discourages voluntary payments, “the
concept of ‘voluntariness’ should be strictly construed and limited.”  Id.
at 346, 318 A.2d at 662; see also N.E. Ins. Co. v. Concord Gen. Mut. Ins.
Co., 433 A.2d 715, 719 (Me. 1981) (noting that “a doubt as to the
applicability of the [voluntariness] exception should be resolved against the
existence of volunteer status,” because “[o]ne who
pays . . . under a mistaken belief that he had an
obligation to pay or interest to protect is not a volunteer” (citations
omitted)).         
¶ 11.        
Applying our precedent to the undisputed facts, we hold that employer’s
continued TTD payments were not voluntary.[2] 
Employer’s obligation to pay TTD continued until plaintiff successfully
returned to work, the employer filed a Form 27 documenting that plaintiff had
reached a medical end result or had failed to make a good faith work search, or
the Department approved a settlement agreement terminating plaintiff’s TTD
benefits.  See Workers’ Comp. Rules 17-18, 3 Code of Vt. Rules 24 010 003-14-15, available at http://www.lexisnexis.com/hottopics/codeofvtrules
[hereinafter Workers’ Compensation Rules]. 
¶ 12.        
In this case, employer’s obligation to pay was terminated upon the
Department’s approval of the parties’ settlement agreement.  The termination of
employer’s obligation to pay TTD benefits was not effective until the
settlement agreement was signed by the Commissioner of the Department, and
employer was not entitled to terminate the TTD payments any sooner.  Workers’
Compensation Rule 17.600 provides:
  Form
15 – Settlement Agreement (Full and Final).  This form may be used to settle a
genuine dispute over the compensability of a claim and/or the extent of
benefits due. Once executed by the parties and approved by the commissioner,
this form shall relieve the employer of all further liability for
compensation benefits related to the injury. This form must be accompanied by a
letter identifying the disputed issue(s), detailing the parties’ respective
positions (supported by adequate medical documentation if necessary), and fully
explaining the terms of the proposed settlement. The agreement shall not be
approved unless the commissioner is convinced that the best interests of the
claimant are served thereby, and under no circumstances should a claimant
be promised that this will occur.  
 
(Emphasis added).  In short, by its plain
language, Rule 17.600 does not permit settlement agreements to be binding
unless certain predicate conditions are met, including execution of the
agreement by the parties, assurance that the best interests of the claimant are
served by the settlement, and approval by the Commissioner.  Here, regardless
of when there was a meeting of the minds between the parties as to the
settlement¾a topic on which there is
considerable dispute¾employer was
obligated to continue making payments under Rule 17.600 until the commissioner
approved the settlement, an event that did not occur until July 13, 2010. 
Therefore, employer’s continued payments after May 1, 2010 were not
voluntary.    
¶ 13.        
Moreover, although the settlement agreement was not itself binding until
approved by the Commissioner, the terms of the parties’ agreement made it clear
that the settlement, if approved, would terminate employer’s obligation to pay
TTD benefits as of May 1, 2010.  This Court interprets the unambiguous terms of
the settlement as a matter of law.  Ianelli v. Standish, 156 Vt. 386,
389, 592 A.2d 901, 903 (1991).  “The cardinal principle in the construction of
any contract is to give effect to the true intention of the parties.”  In re
Cronan, 151 Vt. 576, 579, 563 A.2d 1316, 1317
(1989).  In order to effectuate the intentions of the parties, the
literal terms of the contract cannot always be taken in isolation.  Rather,
“the contract provisions must be viewed in their entirety and read together.”  In
re Stacey, 138 Vt. 68, 72, 411 A.2d 1359, 1361
(1980).  The settlement agreement, executed by plaintiff and approved by
the Commissioner, required employer to pay TTD benefits only until May 1,
2010.  Although employer was obligated to pay TTD benefits when the payments
were made, the parties’ approved agreement essentially retroactively discharged
employer’s TTD obligation effective May 1. 
¶ 14.        
Plaintiff is correct that the settlement agreement called for a lump sum
payment of $230,000, and that employer’s decision to deduct the post-May 1,
2010 TTD payments deprived plaintiff of the agreement’s literal terms.  Instead
of a single payment after the Commissioner’s approval, plaintiff got some of
his settlement monies early.[3] 
However, it is equally true that the agreement required employer to pay TTD
benefits only until May 1, 2010, and that plaintiff’s interpretation of the
contract would deprive employer of the agreement’s literal terms. 
Therefore, these terms cannot simultaneously be fulfilled.  Reading the
provisions together in light of the parties’ obvious intent, however, reveals
that the agreement called for a $230,000 lump sum payment and TTD benefits to
be paid by employer until May 1, 2010.  As the trial court noted, plaintiff received
exactly that.  To hold otherwise would award plaintiff a windfall, contrary to
the parties’ clear intent.  Accordingly, we hold that employer’s TTD payments
after May 1, 2010 were not voluntary, and plaintiff is not entitled to those
payments in clear contravention of the settlement agreement. 
¶ 15.        
Plaintiff suggests that the payments were voluntary because, although
the settlement agreement was not final until approved by the Commissioner,
defendants could have filed a Form 27 terminating benefits effective May 1. 
There is nothing in the Workers’ Compensation Rules authorizing termination of
TTD on the basis of an unapproved settlement agreement in the absence of a
finding of a medical end result, failure to undertake a good faith work search,
or a successful return to work.  See Workers’ Compensation Rules 17-18. 
Plaintiff does not argue that he reached a documented medical end result,
successfully returned to work, or failed to undertake a good faith work search
by May 1, 2010.  Rule 18.  Further, as explained above, termination on the
basis of the settlement agreement could be effective only upon the
Commissioner’s approval of the settlement agreement.  Therefore, employer had
no basis to terminate TTD payments before the settlement agreement was approved.
¶ 16.        
We emphasize the limits of our decision.  Our holding turns on the
specific terms of the parties’ approved settlement agreement in this case and
the timing of the settlement approval process.  
II.
¶ 17.        
Next, plaintiff contends that the trial court’s grant of $1000 in
attorneys’ fees and $250 in costs for prevailing on the medical bill issue was
unreasonable, given the “time and effort” that counsel expended on the
litigation.  Defendants cross-appeal, arguing that plaintiff did not obtain
judicial relief from the court and thus was not entitled to any fees or costs. 

¶ 18.        
Under Vermont law, parties must “bear their own attorneys’ fees
absent a statutory or contractual exception.”  Southwick v. City of Rutland,
2011 VT 105, ¶ 5, 190 Vt. 324, 30 A.3d 1298 (quotation omitted).  Here,
the relevant statutory provision is 21 V.S.A. § 675(a), which provides
that:
If an award is made under the provisions of this chapter, including
interim orders, issued pursuant to sections 643a and 662 of this title, or an
agreement is approved by the commissioner, and the employer or insurance
carrier fails to comply with the award or agreement, the employee, subject to
the stay provisions of subsection (b) of this section, may proceed to collect
all or any part of past due installments in any court of law having
jurisdiction of the amount involved.  If the employee prevails, interest,
reasonable attorney fees and costs shall be allowed.
 
¶
19.        
The key question faced by the
trial court was whether plaintiff “prevail[ed]” on his claim for purposes of
the statute.  The court found that although plaintiff had not prevailed on his
claims that employer took an improper credit against the settlement and that
the credit taken was too large¾characterizing the results as
“unquestionably” favoring employer¾plaintiff did
prevail on his claim that defendants had improperly failed to pay plaintiff’s
medical bill because defendants “ultimately agreed to pay the medical bill
while the litigation was pending.”  
¶
20.        
Defendants argue that this Court
should adopt the U.S. Supreme Court’s holding in Buckhannon Board & Care
Home, Inc. v. West Virginia Department of Health & Human Resources, 532
U.S. 598 (2001), that eligibility for attorneys’ fees requires a “material
alteration of the legal relationship of the parties” effectuated by court
action, such as an enforceable judgment on the merits.  Id. at 604-05
(quotation omitted).  The U.S. Supreme Court rejected the “catalyst theory,”
holding that a “defendant’s voluntary change in conduct, although perhaps
accomplishing what the plaintiff sought to achieve by the lawsuit, lacks the
necessary judicial imprimatur on the change.”  Id.  Defendants argue
that plaintiff did not bring about an alteration of the legal relationship
between the parties sufficient to prevail under Buckhannon, and further
that plaintiff’s claim fails even under the catalyst theory.    
¶
21.        
Here, defendants’ decision to pay
plaintiff’s medical bill was not brought about by judicial order or other
action bearing “judicial imprimatur.”  Id.  Plaintiff cannot prevail
under the Supreme Court’s reasoning in Buckhannon; thus, we are squarely
faced with the decision of whether to apply Buckhannon in our
interpretation of § 675(a).  In Merriam v.
AIG Claims Services, Inc., 2008 VT 8,
¶¶ 16, 22, 183 Vt. 568, 945 A.2d 882
(mem.), we expressly declined the opportunity to overrule our prior case law
endorsing the catalyst theory.  See Kirchner v. Giebink, 155 Vt.
351, 352-53, 584 A.2d 1120, 1121 (1990) (endorsing the catalyst theory). 
Rather, we stressed that although the plaintiff was not entitled to fees in
that case, “[u]nder different facts, a claimant might
prevail before the superior court in such an action either by direct judicial
enforcement of a more specific order, or under Kirchner.”  Merriam, 2008 VT 8, ¶ 22.  We take this opportunity to extend our holding in Merriam
and explicitly preserve the catalyst theory as a possible route to attorneys’
fees under § 675(a).   This accords with our recognition that “[t]he workers’ compensation statute is remedial and is to be
construed broadly to further its purpose of making employees injured on the job
whole.”  Hodgeman v. Jard Co., 157 Vt. 461, 464, 599 A.2d 1371, 1373
(1991).  
¶
22.        
To prevail for purposes of the
catalyst theory, a party must demonstrate: (1) that the filing of the lawsuit
was a “necessary and important factor in achieving” the other party’s change in
conduct, and (2) a “colorable or reasonable likelihood of success on the
merits.”  Kirchner, 155 Vt. at 353, 584 A.2d at 1121-22.  Here, we agree with the
trial court that defendants paid plaintiff’s medical bill as a direct result of
plaintiff’s lawsuit to enforce the terms of the settlement agreement pursuant
to 21 V.S.A. § 675(a).  There is little doubt that plaintiff’s lawsuit was
a “necessary and important factor” in obtaining payment from defendants, and
thus was the catalyst for defendants’ action.  As to the second factor,
although we cannot say whether plaintiff surely would have obtained a judgment
in his favor on the medical bill issue, neither was his claim “frivolous, unreasonable, or groundless” as a matter of
law.  Id. at 354, 584 A.2d at 1122 (quotation omitted).  Plaintiff
demonstrated that defendants had paid medical bills generated by visits with
this same doctor many times before, and argued that the doctor’s diagnosis
during the particular visit at issue was related to, albeit slightly different
from, the injuries giving rise to his workers’ compensation claim.  Moreover,
defendants bore the burden of supporting denial of plaintiff’s claim.  Merrill
v. Univ. of Vt., 133 Vt. 101, 105, 329 A.2d 635, 637 (1974) (holding that
where workplace injury and resulting disability is unquestioned, burden is on
employer to show that disability had ceased).  Therefore, we agree with the
trial court that plaintiff prevailed on the medical bill issue and was entitled
to attorneys’ fees and costs.
¶ 23.        
Trial courts have ample discretion in determining the amount of attorneys’
fees to award, and we will not disturb the court’s decision unless it has
abused this discretion.  Southwick, 2011 VT 105, ¶ 4.  “For purposes of an award of attorney’s fees under Vermont
law, the touchstone is reasonableness.”  Perez v. Travelers Ins., 2006
VT 123, ¶ 13, 181 Vt. 45, 915 A.2d 750.  The court begins with “the number
of hours reasonably expended on the case multiplied by a reasonable hourly
rate,” and can then adjust the fee based on factors such as “the novelty of the
legal issue, the experience of the attorney, and the results obtained in the
litigation.”  L’Esperance v. Benware, 2003 VT 43, ¶ 22, 175 Vt.
292, 830 A.2d 675.  Here, the trial court reduced the award from plaintiff’s requested
$17,932.50 to $1000 in fees and $250 in costs.  The court noted that the unpaid
medical bill was a peripheral issue compared to the rest of the litigation, and
that plaintiff did not provide the discovery supporting payment until compelled
by the court.   
¶ 24.        
As to the latter reason, we caution that
although generally a party’s unnecessary delay may support a reduction in
attorneys’ fees, in workers’ compensation cases, courts must also ensure that
the burden of proof remains on employers to show that their refusal to pay a medical
bill comports with the Department’s orders¾which require employers to pay
medical bills related to the plaintiff’s workplace injury¾and
Vermont’s workers’ compensation laws.  See 21 V.S.A. §§ 640a, 643a; Merrill,
133 Vt. at 105, 329 A.2d at 637.  Although our holding in Merrill
pertained to an employer’s cessation of benefits based on a claim that the
employee was no longer disabled, the precedent is analogous to this case, where
defendants claim that the employee’s injury did not result from the
disability.  
¶ 25.        
Despite this cautionary note regarding the
burden of proof for rejection of medical bills related to workplace injuries,
we hold that the peripheral nature of the medical bill issue and plaintiff’s
unnecessary delay in providing discovery nevertheless provide ample reason to
affirm the court’s decision.  
Affirmed. 

 


 


FOR THE COURT:


 


 


 


 


 


Chief Justice

 


[1] 
Plaintiff raises several other arguments which we dispose of as irrelevant and
without merit.  First, plaintiff disputes the trial court’s reliance on the
facts recited in defendants’ statement of undisputed facts because plaintiff’s
responses were unsupported by record citations.  We do not address plaintiff’s
argument because even if we accept plaintiff’s version of the facts, defendants
are still entitled to summary judgment as a matter of law.  Second, plaintiff
claims that the court erred in stating that the entire payment of $230,000 was
made by July 20, 2010, when in fact employer issued several checks after that
date.  Nowhere in the court’s opinion or its order on plaintiff’s motion for
reconsideration does the court state what plaintiff alleges; rather, the court
correctly stated that employer “has paid exactly the amount agreed on by the
parties in the settlement.”  Even if the court had erred, the error would be
immaterial to the issues presented on summary judgment.  Finally, plaintiff
claims that the court ignored the conflicting evidence as to whether defendants
paid plaintiff’s medical bill and whether the credit taken by employer was
properly calculated.  Plaintiff’s claim that he is entitled to attorneys’ fees
for his success on the medical bill issue forecloses his argument that there is
a dispute of material fact as to whether the bill was actually paid, because,
in order to claim attorneys’ fees, logically he must concede¾and in fact, does concede¾that the bill was paid.   
    


[2] 
We need not address plaintiff’s contention that voluntariness is a question of
fact because, regardless, plaintiff has not demonstrated a genuine dispute of
material fact sufficient to defeat summary judgment.  See Ianelli, 2010
VT 34, ¶ 7.  
   


[3] 
Had the Commissioner rejected the settlement agreement, the TTD payments would
have been considered ongoing, and would not have counted as advances toward
permanency or a lump sum settlement. 


