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Montana Schools Group Workers' Compensation Risk Retention Program v. Department of Labor and Industry

Court of Workers Compensation of Montana

April 21, 1998

MONTANA SCHOOLS GROUP WORKERS' COMPENSATION RISK RETENTION PROGRAM Appellant
v.
DEPARTMENT OF LABOR AND INDUSTRY/ EMPLOYMENT RELATIONS DIVISION Respondent.

          Date Submitted: December 26, 1997

          ORDER REGARDING ASSESSMENT RULES

          MIKE MCCARTER JUDGE.

         Summary: In 1992, Montana Schools Group Workers' Compensation Risk Retention Program (MSG) challenged the Department of Labor's assessment of $162, 477.61 against it under section 39-71-201, MCA (1991), a statute requiring allocation of costs to the three workers' compensation plans identified by statute. The assessment was upheld by a hearing officer, but the WCC ruled that DOL's failure to adopt rules establishing an assessment formula invalidated the assessment formula it used. When the matter was remanded to the DOL, the DOL took two years to adopt rules, but the rulemaking process did not involve real consideration of which costs could be directly allocated. MSG returned to the WCC to challenge the amount of assessment.

         Held: Section 39-71-201, MCA (1991), and the Court's prior opinion required the DOL to engage in real consideration of which costs could be measured by plan and hence allocated directly among the three plans. The DOL failed to do this. The WCC rejects the DOL's argument that the Court should defer to its interpretation of section 39-71-201, MCA (1991), where the statute is not ambiguous and the DOL's interpretation is not consistent with statutory language. The rules adopted by the DOL are thus invalid. Since this matter arose, however, the legislature has amended section 39-71-201, MCA (1991), establishing a different method of cost allocation. Thus, further rule-making regarding the 1991 statutory system would be undertaken solely for this case. Further, the history of this matter makes return of the initial decision-making function on this case to the DOL improper. The WCC orders that a court shall hold an evidentiary hearing to determine cost allocation under section 39-71-201, MCA (1991). The WCC recuses itself from holding that hearing because its operation constitutes a potential cost item at the hearing and given the history of the Court's involvement in this litigation.

         Topics:

Administrative Agencies: Rules: Rule Making. In this case involving insurer's challenge of assessment levied against it by Department of Labor, WCC held DOL failed to consider directive of section 39-71-201, MCA (1991), to consider allocation of direct costs when making rules. The rules were therefore invalid.
Courts: Recusal. In this case involving insurer's challenge of assessment levied against it by the Department of Labor, WCC held DOL failed to consider directive of section 39-71-201, MCA (1991), to consider allocation of direct costs when making rules. The rules were therefore invalid. The WCC had once before sent the matter back to the DOL for rule-making. Due to the fact that the Court's own operation was a potential cost at issue, and given the stance taken by the Court on the matter, the WCC recused itself from handling an evidentiary hearing ordered for determination of the method of assessment.
Statutes and Statutory Interpretation: Construing as a Whole. If possible, a statute must be construed in its entirety; words and phrases cannot be read in isolation. Vita-Rich Dairy, Inc. v. Dept. of Business Regulation, 170 Mont. 341, 348, 553 P.2d 980, 984 (1976); McClanathan v. Smith, 186 Mont. 56, 62, 606 P.2d 507, 510 (1980).
Statutes and Statutory Interpretation: No Meaningless Provisions. In construing a statute, the Court must give meaning and effect to all statutory provisions; a construction which renders a provision meaningless is disfavored. Groves v. Clark, 277 Mont. 179, 184, 920 P.2d 981, 984 (1986) ("It is well settled that this Court must give meaning and effect to all statutory provisions, and that a construction which renders a provision meaningless is disfavored.")
Statutes and Statutory Interpretation: Plain Meaning. The rule of deference to administrative interpretations, see Christenot v. State Department of Commerce, 272 Mont. 396, 401, 901 P.2d 545 (1995), applies only where the statute is ambiguous. If a statute is not ambiguous, it must be applied as written, even if an agency proffers a contradictory interpretation. If the intent of the legislature can be determined from the plain meaning of the words used in the statute, that plain meaning is controlling and the Court cannot nullify or modify it. See, Hern Farms, Inc. v. Mutual Benefit Life Ins. Co., 280 Mont. 436, 441, 930 P.2d 84, 87 (1996).

         Introduction

         ¶1 This case is a continuation of a complaint lodged by the Montana Schools Group Workers' Compensation Risk Retention Program (MSG) with respect to the workers' compensation assessment levied on it in 1992. MSG was assessed $162, 477.61. It paid the assessment under protest and on June 16, 1992, initiated a contested case proceeding before the Department of Labor and Industry (Department). (DLI Record, June 16, 1992 letter of J. Dennis Moreen.)

         ¶2 MSG's challenge to the assessment was heard by a Department hearing officer on January 21, 1993. The hearing officer issued his decision on August 31, 1993, rejecting MSG's challenge.

         ¶3 MSG then appealed to this Court. The appeal was extensively briefed and argued, and finally submitted for decision on April 21, 1995. On June 16, 1995, this Court issued a decision and judgment holding that the Department's assessment formula was invalid because it had not been adopted through rulemaking. (Order on Appeal, June 16, 1995 [1995 Decision].) The decision did not nullify the amount of the assessment, rather it remanded the matter to the Department for a rulemaking proceeding, following which the Department was to compute MSG's assessment in compliance with the rules it adopted. (Id.) This Court expressly retained "continuing jurisdiction to resolve any disputes which may arise in the carrying out of this judgment." (Id. at 28.)

         ¶4 Neither party appealed the decision of this Court.

         ¶5 Following remand, the Department engaged in a rulemaking proceeding. Ultimately, it adopted rules incorporating its past assessment methodology. That process took over two years, culminating on August 5, 1997, with the adoption of rules. Under the adopted rules, MSG will be assessed the same amount for 1992 as it was originally assessed.

         ¶6 On August 27, 1997, MSG sought this Court's further review, alleging that the Department's rules did not comply with the Court's decision or section 39-71-201, MCA (1991).

         Prior Decision

         ¶7 In this Court's prior decision, I determined that the Department must adopt an assessment methodology through rulemaking. (1995 Decision at 24.) I further determined that section 39-71-201, MCA (1991), which is the assessment statute, contemplates "some effort to determine what costs can be directly accounted for. At a minimum, the section requires the Department to determine what direct costs can be reasonably tracked." (Id. at 19.)

         The Rulemaking Proceedings

         ¶8 An initial stab at rulemaking was initiated on June 10, 1996 with a Notice of Public Hearing on the Proposed Adoption of Five New Rules. That initial effort was abandoned and a new proceeding was initiated on February 10, 1997, with the publication of a Notice of Public Hearing on the Proposed adoption of Eleven New Rules.

         ¶9 A hearing on the second set of proposed rules was held on March 21, 1997. The testimony and comments made at the hearing were brief. The transcript of the entire proceeding is 15½ pages, of which the first five pages set out the hearing officer's preliminary comments. Mr. Chuck Hunter provided background information concerning the proceedings themselves. Mr. Brian McCullough, who was responsible for the Department's budgeting and planning, also testified. In the most general of terms, Mr. McCullough discussed cost allocation and gave an opinion that the proposed rules efficiently and fairly allocated the assessment among the three plans. He did not address what costs meet or do not meet the definition of direct costs. ...


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