RENDERED: MARCH 23, 2017
TO BE PUBLISHED
§Supreme Tnurt of Benfuckg
20 16-SC-000383-WC
_ MARGIE MULLINS v _ v . APPELLANT
ON APPEAL FROM COURT OF APPEALS
V. ‘ CASE NO. 201 5-CA-00814-WC
WORKERS’ COMPENSATION BOARD NO. 13-WC-98656
LEGGETT & PLATT, - APPELLEES
HON(_)RABLE ROBERT L. SWISHER, ADMINISTRATIVE
LAW JUDGE AND
WORKER’S COMPENSATION BOARD
OPINION OF THE COURT BY CHIEF JUSTICE{MINTON
AFFIRMING
The Chief Administrative Law Judge approved Margie Mullins’s
settlement of her workers’ compensation claim for Weekly permanent-partial
disability benefits and her election to accelerate the payment of her attorney’s
fee to a lump-sum amount. Indisputably; the lump-sum attorney’s fee payment
reduced Mullins’s Weekly benefit amount pro-rata. But in calculating Mullins’s "
weekly benefits remaining after deduction of the attorney’s fee, the employer’s
workers’ compensation insurance carrier applied a multiplier reflecting the y
future periodic payment of the attorney’s fee commuted to a present value. The
CALJ overruled Mullins’s objection to this calculation, and the Workers’
Compensation Board and the Court of Appeals upheld the CALJ’s ruling. We
affirm because we conclude that the Board and the Court of Appeals correctly
determined that the plain text of the Workers’ Compensation Statutes and .
regulations promulgated under those statutes contemplate the ability to deduct
present-Value discounts for lump-sum'payments effectuated by discounting
future benefits.
I. FAC_TUAL AND PROCEDURAL BACKGROUND.
_Margie Mullins sustained a workplace injury during the course of` her
employment With lLeggett & Platt._ Through counsel, Mullins decided to settle
her workers’\ compensation claim after negotiating with Leggett & Platt’s
insurance carrier, CCMSI. She then entered into a-Form 1 10 Agreement as to
Compensation, which Was approved by the CALJ. The settlement award
included permanent-partial disability benefits awarded at a weekly rate of
\ $218.89 per week for a period of 425 Weeks. _
Following approval of the settlement, Mullins moved the CALJ for /:
attorney’s f`ee. Her motion was sustained and counsel was awarded $9,401.41
in fees. In her Form 109 .Attorney Fee Election, Mullins elected to have this
lump sum paid by Leggett and CCMSI'in a single payment with her weekly
benefits to be reducedpro-rata. According to Mullins, dividing the $9',401.41
by the 373 remaining weeks yields a $25.20 reduction per week, meaning that
she anticipated her reduced weekly rate would then be $193.69.
\ But_CCMSI indicated that her reduced weekly benefits were actually
$191.36. Instead of Simpiy dividing the fees by the remaining weeks, chsI
l calculated that based on the Workers’ Compensation statute and related
2
administrative regulations, her reduced benefits must recoup the present-day
value of the lump-sum attorney’s fee to account for the time-value of money.
Mullins filed a Motion for Determination, disputing CCMSI’s calculation and
claiming that it was not authorized to'take this additional discount. She claims
that this $2.33 per week reduction, Which totals $869.f)9 in sum, allowed
CCMSI_ unilaterally to take extra money from her benefits without ALJ
approval, to_ perform the calculation itself, and thereby breach the terms of the
settlement agreement _' y , -
The CALJ1 deniel her motion. He ruled that'the statutory text and
accompanying administrative regulations supported CCMSI’s{calculation. The
Board affirmed the CALJ’s ruling. Mullins then appealed to the Court of -
Appeals, which also affirmed the CALJ. She now appeals to this Court.
II. ANALYSIS`.
A. KRS 342.320 Authorizes the Discount. ` _
Mullins primarily argues that the Workers’ Compensation Act'does not
authorize attorney-fee discounts when benefits are paid periodically. Kentucky
' Revised Statutes (KRS) 342.320 provides that a claimant is responsible for the
payment of his or her attorney’s f`ees.2 The statute then offers the following -
instructions to paying those fees:
- 1 It should be noted that in the period between granting attorneys’ fees and
Mullins’s motion, a new CALJ took office. `
2 KRS 342.320(2)(a) (“...This fee shall be paid by the employee from the proceeds
_of the award or settlement.). '
4) Except when the attorney’ s fee is to be paid by the employer or
carrier, the attorney’ s fees shall be paid` m one of the following
ways:
a'. The employee may pay the attorney’ s fee out of his or her
personal funds or from the proceeds of a lump sum
settlement; or
b. The administrative law judge, upon request of the employee,
may order the payment of the attorney’ s fee' in a lump sum
directly to the attorney of record and deduct the attorney’ s
fee from the Weekly benefits payable to the employee _in equal
installments over the duration of the award or until the
attorney’ s fee has been paid, commuting sufficient sums to
pay the fee. 3
It should first be noted that although Leggett & Platt, through CCMSI;
physically pays the lump-sum fee, Mullins is the one actually paying the
attorney. Mullins is responsible for compensating the attorney either out of her
own pocket or by seeking an'advancement of her future weekly benefit
payments in order to offer immediate compensation to her attorney. And KRS
342.32(_)(4)(b) simply offers her a mechanism to advance her payments.
l But more critical to her claim, Mullins argues lthat the strictures of KRS
342.320 do not allow CCMSI to consider the present value of future periodic
payments when calculating her reduced weekly benefit. Both the Court of
Appeals and the Board determined that the use of the phrase -“commuting
sufficient sums to pay the fee” authorizes this present-value ldiscount. Mullins
argues this imputes a meaning the word cannot bear. Instead, she contends
that this language is simply synonymous with an “exchange” or “alteration.” So
according to Mullins, the statute merely states that her weekly benefits may be
3 KRS 342.420(4).
altered to pay the fee and does not specifically permit workers’ compensation
' . insurers to discount the present value. She is mistaken.
Though it is indeed true that the term commute may mean to “exchange”
or to “alter” as Mullins claims, we must review the plain meaning of the text in
light of its 'context. To be sure, commute in another context could mean “to
travel back and forth regularly (as between a suburb and a city).”‘f Here, KRS
`342.320 contemplates the payment of attorney fees and KRS 342.320(4)(b)
authorizes the commutation of sums to'pay the fee. Based on this particular
context, the term commutation of payments best reflects the overall purpose o_f
this provision in light of the whole act. And this term bears its own meaning in
this context. A commutation _of payments means “A substitution of lump-sum
compensation for periodic payments The lump sum is equal to the present
value of future periodic payments._”5 So it appears that, in this context, the
statute is in fact contemplating a present-value discount of a lump-sum
payment made through deductions from future periodic payments. And this
makes sense. Applying this principle recognizes the time-value of money and
the truism that a dollar paid today is worth more than a dollar paid tomorrow.
In addition to-what appears to be the plain meaning of the text, we have
a long history of affn°ming that meaning i_n this context. In Hicks v. General .
Refractories Co., we recognized that.the dennitionlof` commute in this context
allows employers or carriers to deduct more than the nominal attorney-fee
4 Merriam-Webster’s Collegiate Dictionary (lOth ed. 2002).
5 Black’s Law Dictionary (10th ed. 2014).
5
v
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figure; it allows them to account for the present day value of_ the sum,6 Indeed,
in Hicks we declared that “To require General Refractories to prepay a portion
of Hicks’s compensation award without the allowance of a discount would have
the effect of increasing the value of the award, without the benefit of legislative
sanction, to the extent that the payment exceeded the present value of future
payments.”7 Though financial principles underlying the Value of money may be
undoubtedly tricky, the Hicks court unlocked the important policy reasons the _'
legislature included the word commute. Without discounting the present value ‘
of a lump-sum payment, workers’ compensation claimants are in actuality
receiving a greater benefit than that authorized by the ALJ.
The importance of this particular language is highlighted by subsequent
decisions reflecting statutory changes throughout the course of the Workers’
Compensation Act’s history. In 1987, the General Assembly removed the term
commute from the strictures of KRS 342.320. In Beale v. Wn'g`ht, we were asked
4 to interpret this textual ch/ange.8 We held that since the statute no longer
contained the word commute, the present-value-attorney-fee discount was no
,'longer applicable.
In 1996, the legislature amended KRS 342.320 again to include language
that the fee may be deducted from the weekly benefits payable to the claimant
in equal installments “commuting sufficient sums to pay the fee.” lt thus re-
6 405 s.w.2d 734, 735 (Ky. 1966).
v Id. _
8 801 s.W.3d 319 (Ky. 1990).
adopted the term we interpreted in Hicks that is consistent with its legal
contextual definition. We conclude that the Board and the Court of Appeals
correctly determined that the plain text of the statute clearly includes the
ability to deduct present-value discounts for lump-sum payments effectuated
by. discounting future bene`fits. Now we turn to CCMSI’s calculation in the
present case. n
B. CCMSI Used the Correct Formula.
In calculating Mullins’s reduced weekly benefits, CCMSI followed the
formula found_in 803 KAR 25:075-, Section 1. This administrative regulation
exists to assist employers or insurance carriers making lump-sum attorney-fee
payments. This entails the following formula:
(1) Employer weeks awarded ~ weeks paid = remaining weeks.
(2) R weeks = P weeks (present worth).
(3) EMP % Attorney fee / P weeks = Y rate.
(4-) R weeks x Y rate = employer attorney fee discount.
(5) EMP attorney fee and discount - EMP attorney fee = EMP
discount
(6) Weekly rate - Y rate = Employer reduced rate.
This appears also expressly to contemplate an attorney-fee discount or
reduction greater than the actual nominal amount of the fee sought because
the payment is made inn a lump sum.` CCMSI reached its calculated reduced
benefit by employing this formula:
1. 425 week award period- 52 weeks already paid= 373
remaining weeks.
2. 373 remaining weeks = 341. 4748 present- -day weeks (per the
2014 Present Worth Table published by the Department of
. Workers’ Claims)
3. $9, 401. 41 attorney fee / 341 4748 present- -day weeks = $27. 53
reduction per week
4. $218. 89 weekly settlement rate- $27. 53 per week reduction =
$1 91. 36 reduced weekly rate.
lBut Mullins takes further issue with this formula. She theorizes that 803 4
KAR 25:075 only applies to claims involving the Special Fund as a party and
because the Sp__ecial Fund no longer exists, the formula is inapplicable. This
entire argument is_founded upon reference to the Special _Fund in another
section of the regulation._ We agree with the courts below that there is no
special significance to this reference, and this does not changethe meaning of
Section 1-~the formula CCMSI used_as an unrelated textual bystander. If our
analysis depended on an examination of Section 2, the presence of language
referencing the Special Fund would no doubt be puzzling. Fortunately, we do
`not face that problem today. n \ l
And for her final argument, Mullins contends that CCMSI is powerless to
make this calculation unilaterally and reduce her benefits itself. She contends
-that the terms of her Form 110 Agreer_nent completely control and the text
appearing in the four corners of the document does not authorize the present-
value discount,l So she believes that CCMSI’s calculating the discount on its
own amounts to a contractual breach. This contention quickly falls-flat
because there is no reference to attorney’s fees at all in the agreement As
Leggett & 'Platt correctly highlight, the payment of attorney’s fees, and the
concomitant present-value discount, are dictates of law. Mullins duty to pay
' attorney fees approved by the ALJ is a statutory duty.
n Because Mullins has failed to establish that CCMSI acted contrary to law
. or failed to reduce correctly her weekly benefits, we hold her issues here have
no merit.
111. coNcLUsioN.
For the reasons stated above, we hereby affirm the Court of Appeals’
ruling.
All sitting. All concur.
coUNsEL FoR` APPELLANT:'
Frank Jenkins III
Frank Jenkins Law Office
COUNSEL FOR APPELLEE: LEGGETT & PLATT
Frederick Allon Bailey
Patrick Joseph Murphy II
Casey, Bailey 85 Maines, PLLC