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Certification From United States District Court for Eastern District of Washington v. Pacificorp

decided: April 25, 1991.

CERTIFICATION FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF WASHINGTON IN DEBBIE C. CLARK, INDIVIDUALLY AND AS PERSONAL REPRESENTATIVE, PLAINTIFF,
v.
PACIFICORP, DEFENDANT. DEE ANNA WHITTEN, INDIVIDUALLY, AS PERSONAL REPRESENTATIVE, AND AS GUARDIAN AD LITEM, RESPONDENT, V. ASSOCIATED BUILDING COMPONENTS, INC., ET AL, DEFENDANTS, THE DEPARTMENT OF LABOR AND INDUSTRIES, APPELLANT



En Banc. Utter, J. Dore, C.j., Brachtenbach, Dolliver, Andersen, and Smith, JJ., and Callow, J. Pro Tem., concur. Durham, Guy, and Johnson, JJ., did not participate in the disposition of this case.

Author: Utter

Two cases have been consolidated for appeal to this court. Clark v. Pacificorp comes to us upon certification from the Federal District Court for the Eastern District of Washington. Whitten v. Associated Building Components was tried in state court. The Department of Labor and Industries appealed to the Court of Appeals, and Ms. Whitten moved for consolidation with Clark v. Pacificorp because three of the certified questions were identical to the issues involved in her case. Both cases involve third party tort litigation under the Industrial Insurance Act, and in both cases the Department of Labor and Industries (hereinafter the Department) appeared to protect its interests.

The federal court certified five questions concerning the implication of the tort reform act of 1986 on the third party chapter of the Industrial Insurance Act. The central issue is: does RCW 51.24.060(1)(f) provide for elimination or merely a reduction of the Department's right to reimbursement if the worker's employer or coemployee is determined to be at fault under RCW 4.22.070? In accordance with the principles of comparative fault, tort reform, and adequate compensation for injured workers, we hold RCW 51.24.060(1)(f), through the incorporation of RCW 4.22.070, requires a reduction of the Department's right to reimbursement in accordance with the employer's share of fault. A trier of fact shall apportion fault to all at-fault entities in accordance with RCW 4.22.070. This includes the injured worker or beneficiary, the employer, and the third party. Each party shall then pay his proportionate share of damages. The Department pays the employer's share in the form of workers' compensation benefits. Where the employer's share of fault exceeds the benefits paid, the Department's right to reimbursement is reduced; where it exceeds the third party's share of fault, the right is eliminated.

In Clark v. Pacificorp, Ms. Clark filed a wrongful death action against Pacificorp following the death of her husband due to a work-related accident. At the time of his death, Mr. Clark was employed by Trees, Inc. Trees, Inc., was an

independent contractor hired by Pacificorp to trim tree branches away from Pacificorp's power lines. Under the Industrial Insurance Act, Trees, Inc., is immune from liability and is not named in this action. Pacificorp has admitted liability in this case but contends that Trees, Inc., and Mr. Clark are comparatively negligent, and therefore its share of damages should be reduced accordingly.

Clark and Pacificorp entered settlement negotiations and agreed that, pursuant to a finding by the trier of fact that the employer (Trees, Inc.) was at fault, Ms. Clark would not be required to reimburse the Department for compensation benefits paid to date and would continue to receive benefits. The Department filed a special appearance memorandum to contest the parties' suggested plan. The Department maintains that, as trustee of the state compensation funds, it is entitled to be made a party to this action and to be afforded notice and an opportunity to be heard. The Department further contends that because the plaintiff failed to comply with the notice requirements under the Industrial Insurance Act in the original action,*fn1 she should not be entitled to eliminate the reimbursement requirement.

In Whitten v. Associated Building Components, Ms. Whitten filed an action against Associated Building Components,*fn2 as the general contractor at the jobsite, to recover damages for the death of her husband. Mr. Whitten was employed by Krueger Sheet Metal Company, which had subcontracted with Associated Building Components to install roofing on an office building. Krueger is immune from suit under the Industrial Insurance Act. At the time of filing, Ms. Whitten did not send the statutory notice to the Department. Ms. Whitten settled with Associated Building Components. She then filed a motion to eliminate the

Department's lien for reimbursement of benefits and to determine the percentage of the employer's fault. The motion was granted. The court also granted the Department's motion to intervene. The Department appealed, and Ms. Whitten moved for consolidation with Clark v. Pacificorp.

In Clark v. Pacificorp, the federal court found, and the plaintiff conceded, that the notice provisions of the Industrial Insurance Act were not satisfied. However, it also found that the Department was on notice of plaintiff's election to proceed against a third party and of plaintiff's retention of counsel in this matter. Furthermore, the court allowed Clark to refile her action, thereby curing any defect in notice. Likewise in Whitten v. Associated Building Components, while the plaintiff did not comply with the statutory notice requirements, the Department had actual notice of the third party action and eventually filed a motion to intervene, which was granted.

Washington's Industrial Insurance Act is the exclusive remedy for a worker who is injured while in the course of employment. RCW 51.04.010. Any worker who is injured while in the course of employment and who makes timely application to the Department of Labor and Industries is entitled to workers' compensation benefits. In the event of death, the worker's beneficiary, upon timely application, is entitled to benefits. RCW 51.28.030. A state fund was established as the source for recovery. All employers are required to contribute to this fund (except for self-insurers), and in return they are granted immunity from tort actions by an employee. RCW 51.04.010; RCW 51.08.175. The act does provide for an exception where the worker's injury is due to the negligence of a third party (defined as one not in the worker's same employ). The worker, or beneficiary, may elect to sue that third party for damages. RCW 51.24.030. By electing to pursue the third party, the beneficiary*fn3 is not

precluded from receiving benefits. RCW 51.24.040. However, the Department is entitled to reimbursement of benefits paid if the third party recovery exceeds these benefits, and the act also provides a lien to enforce the reimbursement right. RCW 51.24.060.

The heart of the controversy in both cases concerns the parties' different interpretations of the effect of the tort reform act of 1986 on the Industrial Insurance Act's third party chapter. Two new sections were added under the tort reform act -- Laws of 1986, ch. 305, § 401 (codified at RCW 4.22.070), and § 403 (codified at RCW 51.24.060(1)(f)). The central issue is: does RCW 51.24.060(1)(f) provide for elimination or merely a reduction of the Department's lien if the worker's employer or coemployee is determined to be at fault under RCW 4.22.070?*fn4 Respondents Clark and Whitten contend that the sections require an elimination of the right to reimbursement and its lien. The Department contends that the right should be reduced only in proportion to the employer's share of fault.

The federal court has certified five questions to us concerning these two statutes. We will address each one separately.

I

Did the failure of the plaintiffs to comply with the notice requirements of RCW 51.24.030(2) eliminate the court's jurisdiction to apply RCW 51.24.060(1)(f) in the original action (United States District Court cause C-88-615-JLQ) filed by the plaintiffs?

[1] The rights of these parties are purely statutory in nature and are set forth in the Industrial Insurance Act. The respondents contend that RCW 51.24.030 does not specify the type of notice to be given the Department of a third party claim, nor the specifics of giving notice. But when read in conjunction with RCW 51.24.080, these questions are answered. Legislative intent is to be ascertained from the statute as a whole; and the sequence of all statutes relating to the same subject matter should be considered. Ravsten v. Department of Labor & Indus., 108 Wash. 2d 143, 150, 736 P.2d 265 (1987).

[2, 3] RCW 51.24.080(1) and (2) define notice. First, the "notice of election" to sue a third party "must" be given to the Department. (This requirement was satisfied in both cases.) The statute then requires:

(1) . . . If an action is filed by the . . . beneficiary, a copy of the complaint must be sent by registered mail to the department . . .

(2) A return showing service of the notice on the department . . . shall be filed with the court . . . .

(Italics ours.) This section does not specify "when" the notice must be sent. However, RCW 51.24.030(2) provides in every third party action that the plaintiff "shall give notice to the department . . . when the action is filed". Read together, these two sections provide that notice of third party actions must be given to the Department when the action is filed.

The statute provides the beneficiary shall give notice of the third party action to the Department when the action is filed. The word "shall" is presumed to be used in the imperative sense. Singleton v. Frost, 108 Wash. 2d 723, 728, 742 P.2d 1224 (1987) (citing 2A N. Singer, Statutory Construction § 57.03 (4th ed. 1984)).

Furthermore, RCW 51.24.030(2) contains both the words "shall" and "may". The statute reads "the plaintiff shall give notice . . . the department . . . may file a notice . . . the parties shall thereafter serve . . . [t]he department . . . may then intervene". (Italics ours.) When a provision contains

both words, it is presumed that the Legislature intended "shall" to be mandatory and "may" to be permissive. Scannell v. Seattle, 97 Wash. 2d 701, 704, 648 P.2d 435, 656 P.2d 1083 (1982).

We believe the notice provision is mandatory. While it is not a prerequisite for establishing jurisdiction between the beneficiary and the third party, it is a condition precedent for establishing jurisdiction to apply RCW 51.24.060(1)(f). Both Clark and Whitten failed to comply with the notice required under RCW 51.24.030(2). Such a failure, lacking more, would eliminate the trial court's jurisdiction to apply RCW 51.24.060(1)(f).

II

Did the filing of the new action (United States District Court cause CS-90-097-JLQ), coupled with the Department's timely receipt of a copy of the new complaint pursuant to RCW 51.24.030(2), give the court jurisdiction to apply RCW 51.24.060(1)(f)?

The respondents contend that they have substantially complied with the notice requirement, no prejudice has resulted, and that it would be unjust, as well as impractical, to ignore these actions and begin anew. We agree.

[4, 5] The purpose of the notice requirement is to protect the Department's interest as trustee of the compensation fund. The courts of this state have long protected this interest. See Arthun v. Seattle, 137 Wash. 228, 242 P. 16 (1926) (it is for the benefit of the State, in administering the accident fund, that the third party election was created); In re Estate of Kinsman, 44 Wash. App. 174, 721 P.2d 981 (1986) (Department can refuse to approve a settlement which is deficient in repaying the Department's lien); Maxey v. Department of Labor & Indus., 114 Wash. 2d 542, 547, 789 P.2d 75 (1990) ("The entire scheme of RCW 51.24 evidences the vital interest of the Department in a recovery from a responsible third party."). The notice provision protects the Department's interest by putting it on notice of the third party action and providing an opportunity to be heard by

filing its "notice of statutory interest" pursuant to RCW 51.24.030(2).

The statutory notice is also designed to protect the Department's property interest in its lien. See Maxey, 114 Wash. 2d at 546-47 (the Department's lien is a property interest). Before the Department may be deprived of its property rights, the statute requires notice reasonably calculated to apprise it of the pendency of an action which might deprive it of those rights. See Peck, Washington's Partial Rejection and Modification of the Common Law Rule of Joint and Several Liability, 62 Wash. L. Rev. 233, 255 (1987) (loss of the lien will adversely affect employer's experience rating, which loss without notice and an opportunity to be heard offends the concept of due process of law).

The purpose behind the notice requirement is met in both Clark v. Pacificorp and Whitten v. Associated Building Components. Both plaintiffs filed the requisite "notice of election to pursue third party" with the Department. In both cases, the Department was aware of the third party litigation through correspondence with plaintiffs' attorneys.

[6] In Clark v. Pacificorp, the federal court allowed the plaintiff to dismiss without prejudice and refile a new action. The court then consolidated the old and new cases as a matter of judicial economy. In the new action, Clark timely served the Department in accordance with RCW 51.24.030(2). The Department argues that consolidation is not proper for two reasons: (1) the original action lacked jurisdiction over the Department and therefore the discovery cannot be used in the new action; and (2) the Department will be prejudiced. The issues which require jurisdiction over the Department (issues regarding fault and elimination of the lien) have not yet been decided by the federal court in Clark v. Pacificorp. Furthermore, the court ordered that all discovery be served ...


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