Belling v. Wash. State Emp't SEC. Dep't

This opinion wasfiled for record

/FTCTEX at: F/i i^ oh v9n , SUPREME COURT CLERK
CH^jusnoB

IN THE SUPREME COURT OF THE STATE OF WASHINGTON

CHRISTOPHER BELLING,

Petitioner,

No. 95097-1

WASHINGTON STATE En Banc
EMPLOYMENT SECURITY
DEPARTMENT,

Respondent. Filed 4 2018

Gonzalez,J.—Under some circumstances, when a person is forced to

litigate to recover an award, others who seek to share in that award must also

share in the attorney fees. This is an exception to the American rule that

parties generally pay for only their own attorneys. Under Washington

statutes, when a person receives both unemployment and workers'

compensation benefits for the same period of time, the unemployment

benefits must be repaid. RCW 50.20.190. There is an exception, however.
Belling V. Employment Security Dep't, No. 95097-1

for situations when "equity and good conscience" makes repayment unfair

under the circumstances. RCW 50.20.190(2).

In this case, Christopher Belling was forced to litigate to receive

workers' compensation. Effectively, the Employment Security Department

seeks to share in that workers' compensation award. We hold that the

department must consider whether equity and good conscience requires it to

share in Belling's attorney fees as part of its larger consideration of whether

it would be fair to partially waive reimbursement of overpaid benefits under

RCW 50.20.190(2). Given the case presented to the department, we cannot

say it erred in declining to reduce reimbursement to account for Belling's

attorney fees and costs. Accordingly, we affirm.

Facts

Belling worked for Malcolm Drilling Company. He was injured on

the job in 2005. He successfully applied for workers' compensation and

received regular time-loss benefits until March 2011. At that point, the

Department of Labor and Industries concluded that Belling could go back to

work, paid him approximately $9,271.80 for a permanent partial disability,

and stopped making regular time-loss payments.

Belling appealed, hiring a lawyer who charged him a 30 percent

contingency fee. He also successfully applied for unemployment benefits.
Belling v. Employment Security Dep % No. 95097-1

The next year, the Board ofIndustrial Insurance Appeals reinstated Belling's

workers' compensation benefits and awarded him back benefits. Part ofthe

award represented workers' compensation benefits for days Belling was also

receiving unemployment benefits. Not long after Belling's workers'

compensation appeal was resolved, the Emplo3mient Security Department

notified him that due to his victory on appeal, he had improperly received

both workers' compensation and unemployment benefits for the same period

of time. The department asserted that "[t]he overpayment cannot be waived

as you are at fault." Clerk's Papers(CP)at 90. It demanded reimbursement

of $22,924, which is the amount Belling received in unemployment benefits

on days he was awarded workers' compensation.

Belling asked the department to waive a portion of reimbursement,

arguing that under the "basic principles ofMahler v. Szucs, 135 Wn.2d 398[,

31 P.3d 1164](1998)[,]... Emplo5mient Security should be willing to pay

its share ofthe legal expenses" necessary to obtain the workers'

compensation award. Id. at 127. The dispute went before an administrative

law judge (ALJ). The ALJ concluded Belling was not at fault^ but that

equity and good conscience did not require waiver of any part ofthe

reimbursement. The commissioner of Employment Security adopted the

'Like the ALJ, we find no evidence that Belling was at fault for the duplicative
payments.
Belling v. Employment Security Dep't. No. 95097-1

ALJ's initial order, making it the decision of the commissioner. Belling

appealed to Superior Court, which largely affirmed. Both sides appealed. In

a split, unpublished opinion, the Court of Appeals reinstated the

commissioner's decision requiring complete reimbursement. Belling v.

Emp't Sec. Dep't, No. 34066-0-III(Wash. Ct. App. Sept. 12, 2017)

(unpublished), http://www.courts.wa.gov/opinions/pdf/340660_unp.pdf.

We granted review.

Analysis

Fee Sharing

We must first decide whether fee sharing under the common fund

doctrine generally applies when the department seeks reimbursement under

chapter 50.32 RCW. The parties agree that this is a question of law we

review de novo. Additionally, our review is guided by the legislative

direction that the unemployment act "shall be liberally construed for the

purpose of reducing involuntary unemployment and the suffering caused

thereby to the minimum." RCW 50.01.010.

Under the American rule, parties do not share attorney fees unless an

exception grounded in contract, law, or equity applies. Winters v. State

Farm Mut. Auto. Ins. Co., 144 Wn.2d 869, 877, 31 P.3d 1164(2001)(citing

Bowles V. Dep't ofRet. Sys., 121 Wn.2d 52, 70-71, 847 P.2d 440(1993)).
Belling v. Employment Security Dep't, No. 95097-1

One equitable exception to the American rule is the common fund doctrine.

Under this doctrine,"a court is authorized to award attorney fees only when

a litigant preserves or creates a common fund for the benefit of others as

well as themselves." City ofSequim v. Malkasian, 157 Wn.2d 251, 271, 138

P.3d 943(2006){citmgBowles, 121 Wn.2d at 70-71).

The common fund doctrine does not apply to every situation where

attorney fees may be accrued. "If the merits of the litigation fall within a
statutory scheme which prohibits the award of attorney fees, or allows such
an award under narrow circumstances, a party cannot enlarge those

circumstances by reference to the common fund doctrine or other equitable
powers ofthe trial court." Leischner v. Alldridge, 114 Wn.2d 753, 757, 790
P.2d 1234(1990)(citing Fleischmann Distilling Corp. v. Maier Brewing

Co., 386 U.S. 714, 719, 87 S. Ct. 1404, 18 L. Ed. 2d 475 (1967)). Both the

unemployment compensation act and the Industrial Insurance Act contain
attorney fees provisions that do not grant fees to claimants in Belling's
position. RCW 50.32.160,^ .100;^ RCW 51.52.120,^ .130,.150.

2 RCW 50.32.160 grants a reasonable fee to claimants who prevail in court "payable out
of the unemployment compensation administration fund." RCW 50.16.050 largely limits
the use of this fund to employment security's administrative costs. It is funded separately
from the unemployment fund, mostly by federal dollars and state general funds. See 42
U.S.C. § 502(a); Laws of 2018,eh. 299, § 222(2).
^ RCW 50.32.100 provides that all administrative adjudicative costs except for the
claimant's attorney fees "shall be paid out of the unemployment compensation
administration fund." This fund is partially financed with federal monies and is subject to
significant restrictions. RCW 50.16.050; 42 U.S.C. §§ 501-504.
* RCW 51.52.120 provides successful claimants with prevailing party attorney fees in
industrial insurance eases appealed to court.
Belling v. Employment Security Dep't. No. 95097-1

We have already specifically found the common fund doctrine cannot

be used to expand the attorney fee provisions in the workers' compensation

and unemployment security statutes. See Rhoad v. McLean Trucking Co.,

102 Wn.2d 422, 426,686 P.2d 483 (1984); Penn. Life Ins. Co. v. Dep'tof

Emp'tSec., 97 Wn.2d 412, 417-18, 645 P.2d 693 (1982). In Pennsylvania

Life, an employer challenged Employment Security's determination that an

employee was eligible for benefits. 97 Wn.2d at 413. The employer

established that the employee had been terminated for misconduct and was

thus ineligible. Id. The trial judge awarded the employer attorney fees

under a statute that gave prevailing claimants attorney fees under limited

circumstances. M at 413-14 (citing former RCW 50.32.160 (1971)). The

employer argued it was entitled to fees under the equitable common fund

doctrine since it had protected the unemployment fund from a

nonmeritorious claim. Id. at 414. This court disagreed, concluding that the

unemployment compensation act

makes no provision for the fixing or awarding of attorney fees to
employers, but protects only the employee and his beneficiaries. So
the Legislature has in the case of both the Industrial Insurance Act and
the unemployment compensation act amended the provisions for
attorney fees to make it clear that they shall be awarded only to
claimants under the statutes.

/J. at 416 (citation omitted){oiling Harbor Plywood Corp. v. Dep't ofLabor

& Indus., 48 Wn.2d 553, 295 P.2d 310 (1956)). Pennsylvania Life thus
Belling v. Employment Security Dep't. No. 95097-1

declined to extend the common fund doctrine to a prevailing employer's

appeal because it would have been inconsistent with the attorney fee system

established by the act. See also Rhoad, 102 Wn.2d at 426(applying similar

principles under the former workers' compensation arena).

Since these cases, there has been considerable development of our

common fund doctrine jurisprudence in the context of automobile insurance

policies. See Matsyukv. State Farm Fire & Cas. Co., 173 Wn.2d 643, 649-

650, 272 P.3d 802(2012)(citing Hamm v. State Farm Mut. Auto. Ins. Co.,

151 Wn.2d 303, 88 P.3d 395 (2004); Winters, 144 Wn.2d 869). These cases

establish that an automobile insurer that has paid first party benefits is

required to pay a pro rata share of attorney fees anytime it seeks

reimbursement out of a judgment or settlement with a tortfeasor. Id. Belling

contends that these cases should be applied here.

While this is a question of first impression in this court, it is not a

question of first impression in Washington appellate courts. In 2005, our

Court of Appeals declined to apply the common fund doctrine to limit

Employment Security's reimbursement of unemployment benefits from a

workers' compensation award. See Delagrave v. Emp't Sec. Dep't. 111 Wn.

App. 596, 605, 111 P.3d 879(2005)(citing Mahler, 135 Wn.2d at 426-27,

436). The court concluded that if the legislature had wanted the department
 Belling v. Employment Security Dep't, No. 95097-1

to partially waive unemployment reimbursement in such situations, it would

have said so. The court noted that the statutory schema already allows for

attorney fees in some circumstances:

RCW 50.32.160 provides for payment of attorney fees and costs out
of the unemployment compensation administration fund only if a
commissioner's decision is reversed. A provision for attorney fees for
recovery of overpayment is notably absent from this provision as well
as from the overpayment provisions of the statutes. See RCW
50.20.085,.190. If the legislature had intended attorney fees to be
available in overlapping benefits scenarios like the one here, the
logical place to include such a provision would be within these three
statutes.

Id. RCW 50.32.160 and RCW 50.20.085 have not been amended since

Delagrave was published in 2005, which suggests the legislature did not

take issue with the opinion.^ The Delagrave court also relied on our case

law that had previously held the common fund doctrine cannot be used to

expand on statutory attorney fees in the employee benefits arena. Id. at 606

(quoting Leischner, 114 Wn.2d at 757). Delagrave noted that the statutory

scheme does permit waiver or partial waiver of reimbursement for reasons of

equity and good conscience. M (quoting RCW 50.20.190(2)). The court

'The third statute cited (and the one most relevant here), RCW 50.20.190, has been
updated several times, hut not in any way that is relevant to attorney fee offsets. See
Laws OF 2013, ch. 189, § 4; Laws of 2011, eh. 301, § 17; Laws of 2007, ch. 327, § 1;
Laws of 2006, ch. 13,§21.

8
Belling v. Employment Security Dep't. No. 95097-1

remanded for consideration whether equity and good conscience required a

partial waiver of reimbursement. Id. at 613.

Belling does not offer a compelling argument for why we should

overrule Delagrave and extend the common fund doctrine given the existing

attorney fee provisions of Title 50 RCW and given that RGW 50.20.190(2)

already allows claimants to argue equity and good conscience, in their cases,

requires waiver. We decline to do so.

Equity and Good Conscience

Next, we must decide whether the department erred in not waiving a

portion of reimbursement under RCW 50.20.190(2)'s equity and good

conscience standard. We stress that Belling does not ask this court to find

reimbursement should be waived because it would be a hardship. We are

mindful that there are facts in the record, mostly elicited by the ALJ,that

suggest it would be. But at oral argument. Belling repeatedly stressed that

he was not arguing that based on his individual situation the department

should have to share attorney fees. Instead, he was arguing that the

department should have to share attorney fees regardless of financial

hardship. In essence, he argued for a presumption offee sharing. A

different outcome might occur in a case where the claimant brings an

argument that fee sharing is equitable and that reimbursement would be a
Belling v. Employment Security Dep't, No. 95097-1

hardship. But that case is not before us. Instead, we are asked decide

between Belling's theory that fee sharing is presumptively required or the

department's theory that fee sharing is always impermissible. We reject

both of their positions.

We assume without deciding that the arbitrary and capricious standard

applies.^ "An agency acts in an arbitrary and capricious manner if its actions

are willful, unreasoning, and in disregard offacts and circumstances."

Lenca v. Emp'tSec. Dep't, 148 Wn. App. 565, 575, 200 P.3d 281 (2009)

(citing Wash. Waste Sys., Inc. v. Clark County, 115 Wn.2d 74, 81, 794 P.2d

508 (1990)). The arbitrary and capricious standard of review is often used

for review of agency discretionary decisions. Id.] RCW 34.05.570(3)(i).

Since Delagrave was announced, the department has taken steps to

analyze whether it would be "against equity and good conscience" to require

reimbursement out of a claimant's successful workers' compensation appeal

in any given case. First, the commissioner issued an opinion it designated as

precedent. In re Peltier, that specifically considered the impact of attorney

fees accrued in order to secure an award that included partially duplicative

^ We note in passing that the only case to address the issue "upheld [the repayment order]
since there is no showing of an abuse of discretion by the Commissioner in declining to
waive the overpayment" without analysis. Berland v. Emp't Sec. Dep't, 52 Wn. App.
401, 410, 760 P.2d 959(1988). "Abuse of discretion" is not an Administrative Procedure
Act standard ofreview of adjudicative decisions. Ch. 34.05 RCW. We leave for another
day, upon proper argument, whether abuse of discretion is the appropriate standard.

10
Belling v. Employment Security Dep't, No. 95097-1

benefits. No. 04-2006-22057(Wash. Emp't Sec. Dep't Comm'r Dec. No.

910, 2d Series Feb. 16, 2007), 2007 WL 5172355.^ Peltier received about

$10,000 in unemployment benefits while her workers' compensation claim

was on appeal. Id. at * 1. Peltier prevailed on her appeal and was,

coincidentally, awarded about $10,000. Id. After paying her attorney, she

was left with about $7,000. Id. The commissioner partially waived

reimbursement so that Peltier was not left in a worse position after her

appeal. Id. at * 1-2. In essence, the commissioner discounted Peltier's

workers' compensation award by the amount of her attorney fees before

seeking reimbursement from that award.

Second, the commissioner revised the relevant administrative rules to

include a nonexclusive list of considerations for determining whether it

would violate equity and good conscience to require reimbursement. Wash.

St. Reg. 08-21-056 (effective Nov. 9, 2008); WAC 192-220-030. Currently,

that administrative rule most relevantly provides:

What does equity and good conscience mean in regard to
overpayment waiver decisions?—^RCW 50.20.190(2). (1)"Equity
and good conscience" means fairness as applied to a given set of
circumstances.

RCW 50.32.095 gives the commissioner authority to designate some opinions as
precedents and publish them. These precedents are treated as persuasive authority in
article IV courts. Martini v. Emp't Sec. Dep't, 98 Wn. App. 791, 795 & n.9, 990 P.2d
981 (2000)(citing Ronald M. Levin, Identifying Questions ofLaw in Administrative Law,
lAGeo. L.J. i, 56(1985)); Wash. Const, art. IV.

11
Belling V. Employment Security Dep't, No. 95097-1

(2)It will be against equity and good conscience to deny waiver
when repayment ofthe overpayment would deprive you ofincome
required to provide for basic necessities including food, shelter,
medicine, utilities, and related expenses. ...
(3)The department may also consider, but is not limited to, the
following factors in determining whether waiver should be granted for
reasons of equity and good conscience ....

WAC 192-220-030.®

Given Belling's arguments, the ALJ applied the Peltier calculation

without also meaningfully considering hardship.^ Under the Peltier

The rule continues:

(a) Your general health, including disability, competency, and mental or
physical impairment;
(b) Your education level, including literacy;
(c) Whether you are currently employed and your history of
unemployment;
(d) Your future earnings potential based on your occupation, skills, and
the local labor market;
(e) Your marital status and number of dependents, including whether other
household members are employed;
(f) Whether an error by department staff contributed to the overpayment;
(g) Whether you refused or were ineligible for other government benefits
because you received unemployment benefits; and
(h) Other factors indicating that repayment ofthe full amount would cause
you undue economic, physical, or mental hardship.
(4) When determining whether a waiver of benefit overpayments may be
granted based on equity and good conscience, the department must consider
whether the employer or employer's agent failed to respond timely or adequately
without good cause to the department's written request for claim information.
This subsection does not apply to negotiated settlements.
(5)The decision to grant or deny waiver will be based on the totality of
circumstances rather than the presence of a single factor listed in subsections (2),
(3), and (4).
^ We note that the ALJ's decision does suggest a lack of hardship in several findings. For
example, the ALJ's decision notes that Belling owns three vehicles, seemingly to support
a conclusion that reimbursement would not be a hardship. Given that one of the vehicles
lacked an engine, one was 50 years old, and the newest was 17 years old, we are highly
skeptical that ownership suggests reimbursement would not be a hardship. The opinion

12
Belling v. Employment Security Dep't, No. 95097-1

calculation, the ALJ started with the $48,251.19 Belling was awarded,

discounted the amount by the $19,730.57 Belling paid in fees and costs, and

determined he received $28,850.62. Since that amount was more than the

$22,924.00 Belling received in unemployment benefits, the department

declined to waive any portion of reimbursement. We stress that the decision

to waive reimbursement under the "equity and good conscience" provision

of RCW 50.20.190 must be based on the totality of the circumstances

presented by the claimant. Bach case must stand or fall on its own merits.

But discounted for attorney fees. Belling still recovered more in workers'

compensation than he was required to reimburse in unemployment

benefits. Given Belling's theory of the case that he is entitled to an offset,

regardless of hardship, we cannot say that the department's decision was

"willful, unreasoning, and in disregard offacts and circumstances." Lenca,

148 Wn. App. at 575 (citing Wash. Waste Sys., Inc., 115 Wn.2d at 81). We

accordingly affirm. Belling's request for attorney fees is denied.

also notes that Belling has no medical debt in collections. There is, however, suggestions
in the record that Belling had medical debt. The fact none was in collections at the time
of the hearing is not helpful in determining whether reimbursement would be a hardship.
Most disturbingly. Belling testified that repaying the full amount the department
requested would leave him "$3,645.18 in the hole." CP at 56-57.
Belling's appeal also resulted in permanent time-loss payments, a significant benefit we
by no means mean to discount.

13
Belling v. Employment Security Dep't, No. 95097-1

Conclusion

We hold that the department must meaningfully consider whether

equity and good conscience requires fee sharing in any case where the

claimant presents the argument. This consideration must be part ofthe

department's overall consideration whether it is fair under the circumstances

to require reimbursement. In this case, given the facts and argument

presented to the department, we cannot say it erred in declining to reduce

reimbursement to account for attorney fees and costs. Accordingly, we

affirm.

14
Belling v. Employment Security Dep't, No. 95097-1

WE CONCUR:

4

15
Belling v. Emp't Sec. Dep't
(Stephens, J., dissenting)

No. 95097-1

STEPHENS, J. (dissenting)—^At the heart of this case is whether notions of

"equity and good conscience" relevant to the Employment Security Department's

(Department)decision to waive overpayment ofunemployment benefits under RCW

50.20.190 require consideration of the legal expenses a claimant incurs in

reimbursing the Department. While the majority lauds a liberal interpretation of

RCW 50.20.190, it applies the provision too restrictively, rejecting Christopher

Belling's waiver claim because he "still recovered more in workers' compensation

than he was required to reimburse in unemployment benefits." Majority at 13. I

respectfully dissent. I would hold that "equity and good conscience" demands a

more searching inquiry. Apart from considering individual financial hardship, the

Department must consider whether basic fairness requires a partial waiver to account
Belling V. Emp't Sec. Dep't, 95097-1 (Stephens, J., dissenting)

for the legal expenses a claimant incurs to recover funds that reimburse

unemployment benefits. Such consideration does not involve any expansion of the

common fund doctrine, but rather a straightforward application of RCW 50.20.190

in "equity and good conscience." I would reverse the Court of Appeals and remand

for further consideration of Belling's claim for partial waiver ofreimbursement.

ANALYSIS

The majority appropriately recognizes that RCW 50.20.190 must be liberally

construed, with the purpose of reducing the suffering caused by involuntary

unemployment. Majority at 4. It embraces the broad interpretation of"equity and

good conscience" adopted by the Court of Appeals in Delagrave v. Employment

Security Department, 127 Wn. App.596,612, 111 P.3d 879(2005), and followed in

the department commissioner's opinion In re Peltier, No. 04-2006-22057 (Wash.

Emp't Sec. Dep't Comm'r Dec. No. 910 2d Series Feb. 16, 2007), 2007 WL

5172355. Unfortunately,the majority fails to appreciate that Belling's waiver claim

is entirely consistent with the claims in Delagrave and Peltier. Belling simply seeks

to have the Department consider a partial waiver of reimbursement to account for

the legal fees he incurred in recovering the workers' compensation benefits that gave

rise to the Department's reimbursement rights. Compare Suppl. Br. of Appellant at

15 ("Under the totality of the circumstances it is consistent with equity and good

-2-
Belling V. Emp't Sec. Dep't, 95097-1 (Stephens, J., dissenting)

conscience to grant Mr. Belling's partial waiver request, equivalent to [the

Department's] pro rata share of attorney fees and costs."), with Delagrave, 127 Wn.

App. at 602('"Appellant argues that he should be allowed a pro rated reduction for

attorney's fees.'").

Accepting Belling's argument requires only that we give effect to the "equity

and good conscience" provision in RCW 50.20.190. There is no need to "overrule"

precedent or extend the common fiind doctrine.

A. Notions of"Equity and Good Conscience"Do Not Limit the Commissioner
to a Given Set ofCircumstances—"Equity and Good Conscience" Simply
Means Fairness

The commissioner ofthe Department may waive overpayment reimbursement

when the claimant is fault free and reimbursement "would be against equity and

good conscience." RCW 50.20.190(2). The majority stresses that the decision to

waive reimbursement under the equity and good conscience provision must be based

on the totality of the circumstances presented by the claimant. Majority at 13. It

recognizes two guidelines that assist the commissioner in determining waiver

decisions. The first is a series offactors set forth in the Washington Administrative

Code(WAC)that delineates specific considerations the commissioner must take into

account, such as the claimant's ability to provide for basic necessities. WAC 192-

220-030(2). The second reflects the calculation performed in Peltier to determine if

-3-
BellingV. Emp'tSec. Dep't, 95097-1 (Stephens, J., dissenting)

the amount received by the claimant, after attorney fees are deducted, is greater than

the amount owed to the Department. 2007 WL 5172355. Reviewing only these

guidelines, the majority concludes that the commissioner appropriately denied

Belling's request for attorney fees. Majority at 10, 13.

While the standards the majority discusses provide important guidance to the

commissioner in determining overpayment waivers, they are not exclusive. "An

agency may not promulgate a rule that amends or changes a legislative enactment."

Edelman v. State ex rel. Pub. Disclosure Comm.'n, 152 Wn.2d 584,591,99 P.3d 386

(2004)(citing State ex rel. Evergreen Freedom Found, v. Wash. Educ. Ass'n, 140

Wn.2d 615, 634, 999 P.2d 602 (2000)). By limiting consideration of overpayment

waiver decisions to the factors contained in the WAC and the calculations contained

in Peltier, the commissioner placed limitations on "equity and good conscience"

under the statute where no such limitations exist. Delagrave, 127 Wn. App. at 611.

The better view is that taken by the Court of Appeals in Delagrave, that "[ejquity

and good conscience means fairness." M at 613. In accordance with RCW

50.20.190(2), the commissioner must consider the totality of circumstances to

determine whether, as a matter ofbasic fairness, the Department ought to waive full

reimbursement of overpaid unemployment benefits.

-4-
Belling V. Emp't Sec. Dep't, 95097-1 (Stephens, J., dissenting)

B. "Equity and Good Conscience" Mandates Consideration of All Relevant
Circumstances, Including the Claimant's Legal Expenses Incurred in
Reimbursing the Department

After determining that "equity and good conscience" require the

commissioner to consider whether an overpayment waiver is fundamentally fair, the

next step in the analysis is to determine what circumstances must be examined to

make this determination. In the case before us, I believe there are two areas of

concern. The first, recognized by the majority, involves the commissioner's failure

to consider a variety of circumstances in Selling's life affecting his current and

future financial well-being. The second, rejected by the majority, involves the

principle of equity described as the common fund doctrine, which supports pro rata

sharing of attorney fees and costs among those who benefit from a recovery obtained

in litigation. Leischner v. Alldridge, 114 Wn.2d 753,756-57,790 P.2d 1234(1990).

Recall the majority's assumed standard of review—"[a]n agency acts in an

arbitrary and capricious manner if its actions are willful, unreasoning, and in

disregard of facts and circumstances." Lenca v. Emp't Sec. Dep't, 148 Wn. App.

565, 575, 200 P.3d 281 (2009)(citing Wash. Waste Sys., Inc. v. Clark County, 115

Wn.2d 74, 81, 794 P.2d 508 (1990)). I would hold that the commissioner willfully

and unreasonably disregarded the following facts and circumstances: (1) that the

record was not well developed with regard to Boiling's expenses,(2) that Belling

-5-
BellingV. Emp'tSec. Dep't, 95097-1 (Stephens, J., dissenting)

was deemed disabled by two independent government agencies and had debt that

was not in collections, as well as evidence of future financial hardship, and (3)that

Belling had no other option than litigation to obtain reinstatement of his workers'

compensation benefits.

In his hearing before an administrative law judge (ALJ), Belling was

questioned in detail regarding his monthly expenses and outstanding debt. Clerk's

Papers(CP)at 61-67. Review of the transcript shows that Belling was unaware of

the exact amount of his expenses or that his responses were simply inaudible. Id.

Even more disturbing, when the ALJ specifically asked about outstanding medical

bills. Belling's response was inaudible. CP at 63. While Belling acknowledged that

he had no medical debt in collections, CP at 64, this does not mean he had no

outstanding medical bills. Without a complete and accurate picture of Belling's

financial situation, the commissioner could not meet the requirements of RCW

50.20.190(2)to render a decision based on "equity and good conscience."

In addition to not having a clear picture regarding Belling's financial situation,

the commissioner does not appear to have considered that Belling was determined

to be disabled by two government agencies, compounding his vulnerability to future

financial hardship. In 2011, the Department ofLabor and Industries concluded that

Belling had a permanent partial disability for which he received a one-time payment

-6-
Belling V. Emp't Sec. Dep't, 95097-1 (Stephens, J., dissenting)

of $9,271.80. Majority at 2. In addition. Belling also receives Social Security

disability payments. CP at 61-62. Payments for a disability are made to an

individual in order to compensate for a decreased ability to obtain future earnings.

Mclndoe v. Dep't ofLabor &Indus., 144 Wn.2d 252,260,26 P.3d 903(2001). Yet,

in Belling's case, there are no findings of fact with regard to his diminished ability

to earn future income or the effect such diminished ability will have on his

outstanding debts. See CP at 203-06. The only finding of fact^ regarding Belling's

financial situation alludes to the fact that he could potentially receive another

disability payment in the future and concludes by highlighting that he has no debt in

collections, '"eats out a lot,'" and owns three vehicles.^ CP at 204. Again, this

analysis is highly deficient with regard to the fimdamental fairness demanded by the

legislature.

Apart from circumstances indicating Belling's financial hardship, notions of

equity and fundamental fairness required the commissioner to consider the fact that

^ "The claimant continues to receive $1,486 twice each month in time loss benefits
from L&I. The claimant could at some point in the future receive another Permanent partial
Disability payout. The claimant also receives $1,700 per month in Social Security
Disability Benefits. The claimant pays $600 per month in rent. He is responsible for no
minor children. He 'eats out a lot,' and has no set grocery budget. The claimant has no
debt in collections, and owns three vehicles. He pays $280 per week for his cell phone
service." CP at 204.
^ I agree with the majority that the fact Belling owns three vehicles was not evidence
indicating his wealth, given the status ofthose vehicles. Majority at 12 n.9.

-7-
BellingV. Emp'tSec. Dep't, 95097-1 (Stephens, J., dissenting)

Belling was required to litigate in order to reinstate his workers' compensation

benefits. When his workers' compensation benefits were terminated, Belling had

two options. He could do nothing and continue to receive unemployment payments,

or, he could appeal the decision and pursue litigation. The fact that the need for

litigation was created by an error of a state agency in the first place should weigh

heavily in favor of Belling receiving a partial waiver to account for the legal

expenses he incurred in pursuing this litigation. While I would not hold that a waiver

is always required in instances where an individual must negotiate benefits between

two state agencies, at a minimum, such a fact merits consideration by the

commissioner in reaching the ultimate waiver decision.

In sum, the large number of gaps in the record regarding Belling's financial

situation, his reduced capacity for future earnings, and the fact that he was forced to

litigate in order to obtain reinstatement of his workers' compensation benefits are all

factors the commissioner should have considered in the totality ofthe circumstances.

Without such consideration, it is impossible to conclude that the commissioner's

decision upholds the statutory mandate of ensuring that reimbursement does not

offend "equity and good conscience." I would remand with instructions that the

Department review its waiver decision to take into account the totality of Belling's

circumstances discussed above.

-8-
Belling V. Emp't Sec. Dep't, 95097-1 (Stephens, J., dissenting)

C. Requiring Consideration of a Claimant's Legal Expenses in "Equity and
Good Conscience"Does Not Require Expanding the Common Fund Doctrine

While the majority opinion leads off with a discussion of the common fund

doctrine, I do not believe this case requires us to expand the doctrine. It is true that

Belling has advocated for applying the common fund doctrine here, building on

Judge Fearing's concurring opinion below. Pet. for Review at 9-12; Suppl. Br. of

Appellant at 7. But that is not the sum total of his argument. As did the claimant in

Delagrave,Belling relies squarely on notions ofequity and good conscience to argue

that the commissioner must consider whether partial waiver is appropriate to account

for the legal expenses he incurred in reimbursing the Department. See Pet. for

Review at 16; Suppl. Br. of Appellant at 15; see also Delagrave, 127 Wn. App. at

609(finding claimant"made a colorable argument for a waiver under the statute" by

seeking equitable pro rata fee sharing, despite his failure to identify RCW

50.20.190). Indeed, Belling makes the statutory argument more clearly than did the

claimant in Delagrave because he expressly relies on the "equity and good

conscience" provision ofRCW 50.20.190 and criticizes the commissioner for failing

to consider the totality of circumstances under the statute. See Pet. for Review at

15-16; Suppl. Br. of Appellant at 15.

Following the liberal interpretation ofRCW 50.20.190 embraced by the Court

of Appeals in Delagrave, we should evaluate Belling's equitable argument on its

-9-
Belling V. Emp't Sec. Dep't, 95097-1 (Stephens, J., dissenting)

merits. Belling is correct that RCW 50.20.190 does not limit considerations of

"equity and good conscience" to circumstances of financial hardship or when the

claimant's recovery, after attorney fees and costs, is less than the Department's

reimbursement amount. Instead, the statute mandates that the commissioner

consider the totality of circumstances, which naturally includes whether it is fair to

saddle a claimant with the full burden of legal expenses incurred in recovering

workers' compensation benefits, while the Department receives its full

reimbursement of unemployment benefits.

The majority deems it dispositive that Belling still received some recovery

after reimbursing the Department, but it does not explain why some recovery is all

that fairness requires. Would its conclusion be the same if a claimant netted $100,

$50, or $1? Consistent with Delagrave and Peltier, notions of "equity and good

conscience" require consideration of the legal expenses incurred by a claimant in

reimbursing the Department with a view toward basic fairness. There is no support

for the majority's decision to arbitrarily limit consideration to "zero sum" scenarios.

While the Department's commissioner may not always conclude that partial waiver

is appropriate to account for legal expenses, RCW 50.20.190 requires that the

argument be considered on its own merits—not solely when the claimant is

otherwise facing financial hardship or no recovery.

-10-
BellingV. Emp'tSec. Dep't, 95097-1 (Stephens, J., dissenting)

Accepting this argument does not take the court down the path of expanding

the common fund doctrine. The majority reads too much into Rhoad v. McLean

Trucking Co., 102 Wn.2d 422,686 P.2d 483(1984)and Pennsylvania Life Insurance

Co. V. Department ofEmployment Security, 97 Wn.2d 412, 645 P.2d 693 (1982).

Majority at 6. In both of these cases, this court specifically explained that the

governing statutes limited the right to attorney fees and the court would not act in

equity to grant attorney fees where the statute was silent. Penn. Life, 97 Wn.2d at

417; Rhoad, 102 Wn.2d at 427. In contrast, this case asks the court to apply RCW

50.20.190(2)'s equity and good conscience standard to determine whether the

Department must consider a partial waiver to account for attorney fees that benefit

both the claimant and the Department. Majority at 9. Because the statute is not

silent but instead expressly incorporates "equity and good conscience" as the

governing standard,this court naturally looks to recognized equitable principles. As

the Court of Appeals correctly stated in Delagrave,"It is clear that equity and good

conscience means, quite simply, fairness." 127 Wn. App. at 612.

As a direct result of Belling's efforts, the Department was able to demand

reimbursement ofunemployment benefits paid to Belling. Were it not for Belling's

workers' compensation appeal, no such reimbursement would have been available.

In these circumstances, notions of fundamental fairness mandate that the

-11-
Belling V. Emp't Sec. Dep't, 95097-1 (Stephens, J., dissenting)

commissioner take into account Belling's legal expenses resulting from the litigation

and consider whether fairness demands that these expenses be shared by the

Department.

For the reasons detailed above, I would hold that the "equity and good

conscience" standard ofRCW 50.20.190(2) obligates the commissioner to consider

a claimant's legal expenses incurred in reimbursing the Department when

determining whether to grant a waiver of overpayment, regardless of whether the

claimant otherwise faces financial hardship or is left with no recovery.

CONCLUSION

"Equity and good conscience" means fairness. While the factors listed in the

administrative guidelines are useful, they are not dispositive. The commissioner

failed to take into account relevant circumstances in Belling's case, including the

legal expenses he incurred in reimbursing the Department. I would reverse the Court

ofAppeals and remand for the Department to review its waiver decision under RCW

50.20.190 in accordance with the totality of the circumstances and fundamental

fairness.

-12-
BellingV. Emp'tSec. Dep't, 95097-1 (Stephens, J., dissenting)

-13-