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Flynn v. Montana State Fund

Court of Workers Compensation of Montana

November 5, 2004

ROBERT FLYNN
v.
MONTANA STATE FUND Respondent/Insurerand and CARL MILLER, Individually and on Behalf of Others Similarly Situated Petitioners LIBERTY NORTHWEST INSURANCE CORPORATION Intervenor.

          Submitted: October 5, 2004

          Stephen D.Roberts, Esq. Lon J. Dale, Esq. Monte D. Beck, Esq. Bradley J. Luck, Esq. Thomas Harrington, Esq. Carrie L. Garber, Esq. Larry W. Jones, Esq. Greg E. Overturf, Esq. Mark E. Cadwallader, Esq.

          DECISION AND ORDER REGARDING DISCLOSURE OF CLAIMANT INFORMATION

          MIKE McCARTER JUDGE

         Summary:

         Following the Supreme Court decision in Flynn v. State Comp. Ins. Fund, 2002 MT 279, 312 Mont. 410, 60 P.3d 397, the petitioner's attorney sought common fund fees with respect to other, nonparty claimants benefitted by the decision. The request was consolidated with a second, parallel case brought by the attorney. Ultimately, the parties entered into a settlement agreement, approved by the Court, which provided that the respondent insurer (State Compensation Insurance Fund) will identify other claimants entitled to Flynn benefits and pay the benefits due them. The agreement also concedes petitioner's attorney's entitlement to common fund attorney fees.

         The settlement agreement provides for disclosure of information regarding nonparty claimants who may be entitled to Flynn benefits. The Workers' Compensation Court approved the disclosure subject to strict confidentiality rules precluding further dissemination of the information to others. After approving the agreement, the Supreme Court decided St. James Community Hosp., Inc. v. Dist. Court of Eighth Jud. Dist, 2003 MT 261, 317 Mont. 419, 77 P.3d 534, which held that the constitutional right of privacy, as well as statutes, precluded disclosure of the identity and other information of patients of a hospital which had overcharged its patients and others for copies of medical records. The parties in this case now seek direction concerning what can and cannot be disclosed in this case.

         Held:

         The right of privacy extends only to information as to which an individual has a reasonable expectation of privacy as measured by societal expectations. Pengra v. State, 2000 MT 291, 302 Mont. 276, 14 P.3d 499; Jefferson County v. Montana Standard, 2003 MT 304, 318 Mont. 173, 79 P.3d 805. Claimants in workers' compensation cases do not have a reasonable expectation of privacy with respect to their identities and information pertaining to their entitlement to benefits, at least with respect to attorneys who have established their entitlement to further benefits under the common fund doctrine and where the attorneys are prohibited from disseminating information regarding their identities and claims to others.

         Topics:

Constitutions, Statutes, Rules, and Regulations: Montana State Constitution: Art. II, section 10. The right of privacy extends only to information as to which an individual has a reasonable expectation of privacy as measured by societal expectations. Pengra v. State, 2000 MT 291, 302 Mont. 276, 14 P.3d 499; Jefferson County v. Montana Standard, 2003 MT 304, 318 Mont. 173, 79 P.3d 805. Claimants in workers' compensation cases do not have a reasonable expectation of privacy with respect to their identities and information pertaining to their entitlement to benefits, at least with respect to attorneys who have established their entitlement to further benefits under the common fund doctrine and where the attorneys are prohibited from disseminating information regarding their identities and claims to others.

         ¶1 Prior proceedings in this case established the right of the petitioner, Robert Flynn (claimant), to a credit against the social security offset[1] taken with respect to his workers' compensation benefits. The credit is for one-half of the attorney fees and costs he expended in securing the social security benefits. Flynn v. State Comp. Ins. Fund, 2002 MT 279, 312 Mont. 410, 60 P.3d 397.

         ¶2 Following that determination, the claimant sought common fund attorney fees with respect to other, nonparty claimants who will benefit from the main decision. This case was consolidated with a parallel action brought by Flynn's attorney - Miller v. Montana State Fund, WCC No. 2003-0771.

         ¶3 The Montana State Fund (State Fund) contested the claimant's request for common fund certification. The issues raised by the State Fund were determined by order of this Court on August 5, 2003, which is reported at Flynn v. State Comp. Ins. Fund, 2003 MTWCC 55. In that decision this Court held that the Supreme Court's decision found at 2002 MT 279 applied retroactively and that Flynn's attorney is entitled to common fund fees with respect to other claimants who benefit from the precedent established in that decision.

         ¶4 The State Fund appealed my common fund decision. However, the parties thereafter entered into a mutually agreeable settlement which resulted in the dismissal of the appeal. The terms of the settlement provide that the State Fund will identify and indemnify other similarly situated claimants. Under the agreement, the claimants' attorney is entitled to claim common fund attorney fees with respect to the additional benefits and credits due the nonparty claimants. The agreement was reviewed, approved, and adopted by this Court.

         ¶5 Pursuant to a strict confidentiality agreement[2] approved by this Court, the State Fund has provided the claimants' counsel with the names of the Flynn claimants it has identified. Claimants' counsel is under a strict obligation precluding him from disclosing the shared information to others. His role, as contemplated by the parties and this Court, is to assist in assuring that claimants entitled to Flynn benefits are in fact identified and that the additional benefits and/or credits due them are properly calculated and paid.

         ¶6 Following this Court's approval of the agreement regarding the sharing of information, the Montana Supreme Court decided St. James Community Hosp., Inc. v. Dist. Court of Eighth Jud. Dist, 2003 MT 261, 317 Mont. 419, 77 P.3d 534. In that case, the Court held that medical providers are constitutionally and statutorily prohibited from disclosing medical information, including the identity of patients, to a plaintiffs counsel in a class action even though the class action potentially benefitted the very patients whose identity was protected. Id., ¶¶ 8, 9. In light of the decision in St. James, the parties now seek guidance regarding further disclosure of information.

         Discussion

A. Background

         ¶7 Where a court decision establishes the right of other nonparty claimants to additional benefits, a common fund is created. Murerv. State Comp. Mut. Ins. Fund, 283 Mont. 210, 222-23, 942 P.2d 69, 76-77 (1997); Rausch v. State Comp. Ins. Fund, 2002 MT2O3, ¶¶45-48, 311 Mont. 210, 54 P.3d 25. The common fund extends to all claimants benefitted by the decision irrespective of which insurer (or self-insured) is liable for the benefits. Ruhd v. Liberty Northwest Ins. Corp., 2004 MT 236, ¶ 25 (Ruhd II.)[3].

         ¶8 In Ruhd II, the Supreme Court specifically directed the Workers' Compensation Court to "supervise enforcement of the common fund pursuant to Rausch, [4] and all court-approved agreements stemming from it, from all insurers involved." 2004 MT 236, ¶ 25 (footnote added). Thus, this Court has a duty to assure that claimants benefitted by court decisions are identified and paid the benefits owing them, and to then determine the amount of attorney fees due the prevailing claimants' attorneys.

         ¶9 While the common fund doctrine is predicated on the right of the attorneys bringing the principal litigation to collect attorney fees from nonparties who benefit from the litigation, Murer, 283 Mont, at 222, 942 P.2d at 76, and Rausch, 2002 MT 203, ¶ 45, the rationale for the doctrine is the proverbial tail that wags the dog. Before attorney fees can be determined, the claimants who are due additional benefits must be identified and the amounts due them must be calculated. Such identification and calculation is the major undertaking in any common fund case. In contrast, the calculation of attorney fees is simply a matter of determining a reasonable and appropriate percentage or amount to be paid the successful attorneys.

         ¶10 This Court has extensive experience in supervising the enforcement of common fund rights. It has supervised common fund proceedings following Murer v. State Comp. Mut. Ins. Fund, supra.; Broeker v. State Comp. Mutual Ins. Fund, 275 Mont. 502, 914 P.2d 967 (1996); Rausch v. State Comp. Ins. Fund, supra.; and in this case. The Murer case involved 3, 200 claimants and is still not closed, although the case is getting very near to finalization.

         ¶11 Based on my experience in common fund cases, I respectfully disagree with the Supreme Court's statement in Ruhd that "[e]forcement in a specific case is not a necessary element of the common fund doctrine." Ruhd, ¶ 23. Lacking enforcement, i.e., identification of benefitted claimants and the amounts of additional benefits due them, the beneficiaries of the common fund cannot be identified and attorney fees cannot be determined.

         ¶12 In each of the common fund cases I have supervised, including this one, I have enlisted the parties and their counsel in a cooperative endeavor to identify benefitted claimants, calculate the additional benefits due them, pay the additional benefits, and ultimately determine the attorney fees due claimants' counsel. By acting in concert, we have avoided time-consuming, costly discovery, as well as further, contentious litigation. We have spent hours around conference tables identifying the most efficient and effective means for identifying affected claimants and for calculating the benefits due them. The process in each of the cases has been efficient and effective. On the other hand, the time and effort spent by claimants' counsel in each of these cases has far exceeded the time and effort they spent in establishing the precedent giving rise to the common fund.

         ¶13 In Ruhd, the Supreme Court noted that there are "only 165 permanently totally disabled claimants" affected by the decision. Ruhd, ¶ 24 (italics added). Such a small number of claimants may suggest that enforcement of the common fund doctrine will be simple and straightforward. However, information furnished to this Court in a post-remand conference held on October 5, 2004, with counsel and officials of the Department of Labor and Industry (DLI) indicates that more than 165 claimants are affected by the Ruhd decision. Additional, difficult work needs to be done to identify all of the affected claimants. I have attached a copy of my minute entry of the conference. A copy of the minute entry is also posted on the Court's WEB site, http://wcc.dli.state.mt.us. A copy of the transcript of the conference is also posted on the Court's WEB site and with this reference is made a part of the record in this case.

         ¶14 The information furnished at the conference illustrates the difficulty and time-consuming nature in enforcing the common fund doctrine. The DLI's initial data identified 377 permanently totally disabled (PTD) claimants. One hundred sixty-seven (167) are insured by the State Fund. That leaves another 210 claimants who are insured by 57 insurers, excluding the Uninsured Employers' Fund and the Western Guaranty Insurance Fund.[5] Moreover, the DLI's data is incomplete. It covers only PTD claimants who filed claims after March 1995 or who were paid benefits after April of 1995.[6] The decisions in Ruhd and Rausch affect claimants injured after July 1, 1991, thus there is a period of four years for which there is incomplete data.

         ¶15 Moreover, the Supreme Court has under advisement an appeal in Rausch in which the petitioners contend that all PTD claimants injured since 1987 are encompassed in the decision. The original decision in Rausch applied only to claimants injured on or after July 1, 1991. Depending on the outcome of the appeal, this Court may have to expand the proceeding to encompass PTD claimants injured between 1987 and 1991, thus requiring the additional mining of data.

         ¶16 Additional data mining will require either compelling each Montana insurer and self-insured (there are over 600 of them) to identify other PTD claimants and/or resorting to an old database maintained by the Division of Workers' Compensation (Division) prior to its demise in 1989. 1989 Mont. Laws, ch. 613. The Division database is commonly referred to as the DBO2 database. For a period of time after the Division was dissolved, the State Fund maintained the database.

         ¶17 In Rausch, the Court was also alerted to the fact that some PTD claimants may in fact be improperly classified as temporarily totally disabled. If the common fund is extended to encompass such improperly classified claimants, the data mining will have to expanded.[7]

         ¶18 Finally, in Ruhd and Rausch the Court will have to hale at least fifty-seven insurers before the Court to determine whether they have paid the affected claimants the impairment awards required by law. It will then have to compel payment of those impairment awards not already paid.

         ¶19 Ruhd and Rausch are not the only common fund cases pending in this Court. This Court has previously held that the common fund doctrine applies to Schmill v. Liberty Northwest Ins. Corp., 2003 MT 80, 315 Mont. 51, 67 P.3d 290 (striking down the apportionment provision of the Occupational Disease Act), and Stavenjord v. Montana State Fund, 2003 MT 67, 314 Mont. 466, 67 P.3d 229. Schmill v. Liberty Northwest Ins. Corp., 2004 MTWCC 47; Stavenjord v. Montana State Fund, 2004 MTWCC 62. Those cases involve thousands of claimants - the State Fund alone has identified 3, 500 potentially affected claimants. Stavenjord, 2004 MTWCC 62, ¶ 25.

         ¶20 I have set out the above information to illustrate the nature of the tasks involved in enforcing the common fund doctrine. The information provides the background and setting for the St. James issue.

         B. The St. James Issue

         ¶21 To facilitate the enforcement of the common fund doctrine, in each of the common fund cases I have handled to date, I have authorized insurers to provide the claimants' counsel with information and documents identifying affected claimants and showing the basis for calculating the additional benefits due them. The dissemination of the information has been subject to strict confidentiality agreements. Claimants' attorneys in each of the cases have been integrally involved in the enforcement process and have made major contributions to the process. Indeed, their assistance has been essential to the process. And, they have honored the confidentiality requirements.

         ¶22 St. James, however, raises questions as to whether I can authorize insurers to share information with claimants' counsel. Both parties in the instant case agree these questions must be addressed before proceeding further with the implementation of their agreement.

         ¶23 St. James was a class action seeking "monetary damages predicated upon excessive fees allegedly charged for copies of patients' medical records from 1993 to 1999." 2003 MT 261, ¶ 2. The District Court held that the defendant medical providers had overcharged patients and their representatives, i.e., attorneys, for copies of medical records. It certified a class consisting of patients and others who had obtained copies of records and gave notice to the potential class members, apparently without disclosing individual identities. The District Court gave class members an option to "opt-out" of the class; members who failed to expressly "opt-out" were automatically included in the class.

         ¶24 Following the class determination and notice to class members, plaintiffs filed discovery requests seeking information as to the identity of patients within the class and the charges they had incurred for copies of records. The District Court ordered the health care providers to provide the information. The providers then sought a writ of supervisory control quashing that order.

         ¶25 In considering the writ, the Supreme Court noted that ail patients who had not expressly elected to "opt-out" of the class had in theory become clients of the plaintiffs' attorneys but that "[i]n essence, plaintiffs' counsel are seeking to identify their own clients ... [to enable them] to compute damages and notify the class members." 2003 MT 261, ¶ 6. The Court went on to hold that the provisions of the Montana Health Care Information Act and, "[m]ore importantly, Article II, Section 10" of the Montana Constitution protected the patients from the non-consensual release of information identifying them. Id., ¶ 8. Finally, the Court held that failure of patients to reply to an opt-out notice did not constitute consent to release their names and other information to plaintiffs' attorneys.

         ¶26 The Court in St. James recognized that its decision created a dilemma as to how to enforce the constitutional and statutory privacy rights of the class members while advancing their rights to damages for copying overcharges. It resolved the dilemma by requiring the District Court to provide an "opt-in" notification. An "opt-in" notification assured that the class members expressly consented to the release of identifying information to plaintiffs' attorneys.

         ¶27 In the present case, the State Fund has expressed concern that St. James precludes the release of claimant information to the claimants' attorney. It has suggested that the Court follow an opt-in procedure similar to that required in St. James.

         ¶28 An opt-in procedure will complicate and delay identification and payment of claimants entitled to Flynn benefits. It may also result in the imposition of additional administrative burdens on the Court, which would be tasked with undertaking its own independent inquiry with respect to benefits due those who fail to expressly opt-in. I therefore concluded that I will adopt an opt-in procedure only if it is legally required by St. James.

         ¶29 The decision in St. James has both constitutional and statutory underpinnings. The constitutional foundation is Article II, section 10 of the Montana Constitution. The statutory foundation is the Uniform Health Care Information Act, § 50-16-501, et seq., MCA (2003).

         ¶30 Article II, section 10 of the Montana Constitution provides: "The right of individual privacy is essential to the well-being of a free society and shall not be infringed without the showing of a compelling state interest." The section neither defines what is encompassed in the right of privacy or what constitutes a compelling state interest. A review of Montana Supreme Court decisions ...


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