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Heisler v. State Compensation Insurance Fund

Court of Workers Compensation of Montana

March 17, 1998

MICHAEL E. HEISLER Petitioner
v.
STATE COMPENSATION INSURANCE FUND Respondent/Insurer for HINES MOTOR COMPANY Employer.,

          Submitted: March 6, 1998

          ORDER AND JUDGMENT DENYING ATTORNEY FEES AND PENALTY AND AWARDING COSTS

          MIKE MCCARTER JUDGE

         Summary: This matter is on remand from the Supreme Court, following that Court's reversal of the WCC's determination that a regulation requiring prior approval for a change in physicians was not unconstitutional. The matter on remand involves claimant's demand for penalty and attorneys fees. Respondent State Fund argues that penalties and attorneys fees are barred by the Court's prior judgment, which did not award or deny fees.

         Held: Based on a review of the litigation of this matter prior to appeal, the Court concludes that judgment was entered in the WCC based on claimant's request that a summary judgment order become the final judgment in the case. Claimant had represented pursuant to that request that "no further evidence or arguments" would be made "regarding the issues raised in this petition." Although issues of attorneys fees and penalty had been raised in the petition and discussed in pretrial conferences, claimant's request for entry of judgment based on his representation that no further evidence or argument would be offered led to a final judgment in the WCC dismissing all claims with prejudice. The Supreme Court decision reversed only the WCC decision on the regulation's constitutionality, leaving the other aspects of dismissal standing. Under the law of the case doctrine, the matters of attorneys fees and penalty may not now be litigated. Costs, however, are awarded.

         Topics:

Attorneys Fees: Cases Denied. Following remand from the Supreme Court, which reversed the WCC decision against claimant, claimant sought attorneys fees and a penalty. The insurer argued that request was barred by the WCC judgment, which was entered at claimant's request based on the representation that no further evidence or argument would be offered. The WCC agreed, holding that its order had dismissed all claims with prejudice, including prior claims for penalty and attorneys fees, and that the Supreme Court decision reversed only the WCC order regarding the constitutionality of a regulation. Under the law of the case doctrine, claims for attorney fees and penalty were dismissed.
Judgments: Law of the Case. Following remand from the Supreme Court, which reversed the WCC decision against claimant, claimant sought attorneys fees and a penalty. The insurer argued that request was barred by the WCC judgment, which was entered at claimant's request based on the representation that no further evidence or argument would be offered. The WCC agreed, holding that its order had dismissed all claims with prejudice, including prior claims for penalty and attorneys fees, and that the Supreme Court decision reversed only the WCC order regarding the constitutionality of a regulation. Under the law of the case doctrine, claims for attorney fees and penalty were dismissed.

         ¶1 This case is on remand from the Supreme Court following a decision striking down an administrative regulation requiring the claimant to obtain approval of the State Compensation Insurance Fund (State Fund) prior to changing his treating physician.

         ¶2 On remand the claimant, Michael Heisler (Heisler), requests a penalty, attorney fees and costs. (Petition for Assessment of Reasonable Attorney's Fees, Costs and Penalties (June 2, 1997).) Heisler supports his motion with a lengthy brief in which he argues that the State Fund acted unreasonably in defending the unconstitutional regulation. He also argues that the State Fund acted unreasonably in refusing to approve Heisler's request to change his treating physician.

         ¶3 In support of his arguments, Heisler cites numerous exhibits and depositions. The factual nature of his request for attorney fees is apparent from the following statement in his supporting brief:

The record, thus, demonstrates that the State Fund treated Heisler's claim from first to last in a flatly unreasonable manner. It continually ignored, denied, delayed, or begrudged requests which were made by Heisler and his doctors. The State Fund's actions often were absolutely arbitrary, and gravely delayed Heisler's treatment and recovery.
The State Fund's denial of Heisler's right to choose physicians was part of this larger pattern or arbitrary conduct. The denial had no articulable rationale whatever. Moreover, it was based on a statute which the Supreme Court held irrational in its decision in this case.

(Brief in Support of Petition to Assess Penalties, Attorney's Fees, and Costs at 7.)

         ¶4 In its response, the State Fund urges that penalties and attorney's fees are barred by this Court's prior judgment. (Combined State Compensation Insurance Fund Motions; Response to Petition Seeking Fees, Cost, and Penalties; And, Response to the Petition to Declare Certain Sections of Law Unconstitutional at 2.) It also requests an evidentiary hearing with respect to the factual allegations advanced by Heisler. (Id.)

         ¶5 A conference concerning the motion was held with counsel on November 20, 1997. The potential for settlement was discussed and counsel indicated their willingness to engage in settlement negotiations. Based on that willingness, I deferred any ruling on the motion and on whether an evidentiary hearing would be required. However, I indicated that if I were inclined to agree with the State Fund's contention that Heisler is barred from pursuing attorney fees and a penalty, I would probably go ahead with an evidentiary hearing.

         ¶6 My thought at that time focused on judicial economy. If I held that the request for attorney fees and penalty was barred, there would undoubtedly be a second appeal, which if successful would send the matter back to this Court for yet a third time. As I assessed the problem, at that time, it would be better to go forward with an evidentiary hearing and address all legal and factual contentions of the parties. Thus, on any appeal, the Supreme Court could finally resolve the dispute without any potential for a remand for a third proceeding.

         ¶7 Thereafter, the parties engaged in settlement negotiations but those negotiations were unsuccessful. I then set the matter for an evidentiary hearing.

         ¶8 After setting an evidentiary hearing, the Court received two motions regarding on-going discovery. The first motion was filed by the State Fund to quash certain depositions noticed by Heisler, including the deposition of a doctor. (Motion and Support Memorandums to (1) Quash Depositions and (2) for Telephone Conference to Discuss Clarification of Issues (2/24/98).) The second was a motion by Heisler to compel discovery and for sanctions. (Petitioner's Motion to Compel Discovery and Impose Sanctions (2/26/98).)

         ¶9 In the meantime, numerous discovery subpoenas were filed with the Court.

         ¶10 I scheduled a telephone conference with counsel as provided in ARM 24.5.316.[1] Prior to the telephone conference, I reviewed the motions and supporting briefs. I also went back through the file and reviewed Heisler's original post-remand motion, the briefs filed in support and opposition to the motion, the procedural history of the case, this Court's original judgment, and the Supreme Court's decision on appeal. Heisler's post-remand motion had been fully briefed and was submitted for decision; however, I had deferred decision.

         ¶11 After my review, I concluded that the State Fund's objection to Heisler's motion for attorney fees and penalties is meritorious. I further concluded that the prospective discovery and evidentiary hearing promises to be extensive and contentious and will not serve judicial economy. During the conference call with counsel on March 3, 1998, I informed counsel of my determination and stayed all further discovery pending my issuing a written decision.

         Discussion: Attorney Fees and Penalty

         ¶12 Heisler filed his petition on March 9, 1994. He alleged that he had a statutory and constitutional right to choose his treating physician and to thereafter change his choice of physicians without any prior approval of the State Fund. He alleged that he had chosen Dr. Richard Nelson as his treating physician but that the State Fund had refused to recognize Dr. Nelson. Finally, he alleged that the State Fund's refusal to recognize Dr. Nelson as his treating physician was unreasonable. With respect to the last allegation, he sought both attorney fees and a penalty.

         ¶13 On March 10, 1994, this Court issued a scheduling order fixing pre-trial deadlines and setting the trial for the week of June 27, 1994. On June 6, 1994, Heisler moved for summary judgment based "upon the Petition for Trial in this cause, the Insurer's response to the Petitioner, and the Memorandum of Authorities ...


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