Teresa Patrick v. Wal-Mart, Incorporated

Case: 11-60217 Document: 00511859430 Page: 1 Date Filed: 05/17/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
May 17, 2012
No. 11-60217 Lyle W. Cayce
Clerk
TERESA G. PATRICK,
Plaintiff-Appellant
v.
WAL-MART, INCORPORATED – STORE #155; NATIONAL UNION FIRE
INSURANCE COMPANY OF PITTSBURGH, PENNSYLVANIA,
Defendants-Appellees
Appeal from the United States District Court
for the Northern District of Mississippi
Before JONES, Chief Judge, and PRADO and SOUTHWICK, Circuit Judges.
LESLIE H. SOUTHWICK, Circuit Judge:
The issue before us is whether a claim for a bad faith denial of workers’
compensation benefits was untimely brought by the worker. We agree with the
district court that it was, and AFFIRM.
FACTUAL AND PROCEDURAL HISTORY
Teresa G. Patrick suffered a lower-back injury on July 28, 1997, while
stocking shelves in a Wal-Mart in Senatobia, Mississippi. Wal-Mart’s workers’
compensation carrier, National Union Fire Insurance Company, initially denied
coverage. Patrick filed a petition to controvert. After an evidentiary hearing,
Administrative Judge (AJ) Linda Thompson in a September 14, 1999 order held
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that Patrick had sustained a compensable injury and was entitled to temporary
total disability benefits “of $187.01 per week beginning July 8, 1998, and
continuing until June 9, 1999.” See Miss. Code Ann. § 71-3-17(b).
The employer and carrier (collectively “defendants”) had argued that the
injury was not work-related. Nonetheless, they did not petition for review of the
AJ’s decision by the Workers’ Compensation Commission. Id. § 71-3-47; MWCC
Proc. R. 10. In October 1999, the defendants paid Patrick $9,649.29 as a lump
sum in satisfaction of the temporary benefits that had been awarded.
For work-related injuries such as those Patrick suffered, Mississippi law
provides for temporary benefits, payable for a maximum of 450 weeks; also
allowed are up to 450 weeks of permanent disability benefits after the worker
reaches “maximum medical recovery.” Miss. Code Ann. § 71-3-17(a)-(c).
Permanent disability benefits would be based on her loss of “wage-earning
capacity.” Id. § 71-3-17(c)(25). The AJ in her 1999 order determined the injury
was compensable and the amount of temporary disability benefits. She noted
testimony that Patrick had “a permanent medical impairment of 10% to the body
as a whole” but concluded it was “too soon” to rule on that issue. Instead, the AJ
“ordered that a determination about permanent occupational disability or loss
of wage-earning capacity, if any, will be reserved until a later time.”
Though Patrick in 1999 was awarded only 11 months of temporary
disability benefits, no further orders from a Commission AJ appear until 2005.
According to a state court opinion, after 1999 Patrick worked at other jobs,
suffered additional injuries, and at some point filed a claim for additional
benefits. Wal-Mart Stores, Inc. v. Patrick, 5 So. 3d 1119, 1122 (Miss. Ct. App.
2008). Another evidentiary hearing was held, this time before AJ Tammy
Harthcock. On September 6, 2005, the AJ found Patrick totally and
permanently disabled. The AJ ordered payment of $187.01 for 450 weeks (the
same amount as before but for a much longer period) beginning on July 28, 1997,
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and payment of all reasonable and necessary medical expenses incurred due to
the injury. Id. at 1122-23. Credit was given defendants for prior payments. The
defendants petitioned the Commission for review. It affirmed.
On first-level judicial review, the Circuit Court of Tate County affirmed
the permanent benefit award but reversed the finding of liability for some of
Patrick’s claimed medical expenses. Patrick’s appeal was assigned to the
Mississippi Court of Appeals, which affirmed the state circuit court. Id. at 1121.
Patrick’s petition for writ of certiorari to the state Supreme Court was denied.
Wal-Mart Stores, Inc. v. Patrick, 11 So. 3d 1250 (Miss. 2009) (Table). The denial
was on April 9, 2009, and the Court of Appeals’ mandate issued 21 days later.
Id.; Miss. R. App. P. 41(b).
On July 9, 2010, Patrick filed a complaint in state circuit court against
Wal-Mart and its carrier alleging bad-faith refusal to pay benefits in 1999. She
claimed that the defendants’ failure to put on proof at the 1999 administrative
hearing had shown the absence of any “arguable reason” for their initial denial
of compensation. The defendants removed on the basis of diversity of citizenship
and then moved to dismiss. They argued that Patrick’s suit had accrued 20 days
after AJ Thompson’s 1999 order and was barred by Mississippi’s three year
statute of limitations. See Miss. Code Ann. §§ 71-3-47, 15-1-49(1).
Patrick argued the statute of limitations did not commence until the Court
of Appeals’ 2009 mandate. She obtained leave to file a second amended
complaint alleging that defendants “refused and continue to refuse” payment
“both before and after [the] September 14, 1999 Order.” The district court
granted motions to dismiss. The court concluded that Patrick’s allegations
relating to the initial denial of temporary benefits were barred by the statute of
limitations. The court also held that the amendments to Patrick’s complaint
that charged continuing bad faith after the 1999 order failed to satisfy the
plausibility requirement for pleadings. Patrick timely appealed.
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DISCUSSION
Our review of a district court’s dismissal for failure to state a claim is de
novo. Amacker v. Renaissance Asset Mgmt. LLC, 657 F.3d 252, 254 (5th Cir.
2011). “Under Rule 12(b)(6), a claim may be dismissed when a plaintiff fails to
allege sufficient facts that, taken as true, state a claim that is plausible on its
face.” Id. To withstand dismissal, a complaint must contain “factual content
that allows the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
Sitting in diversity, we apply the substantive law of Mississippi. Barden Miss.
Gaming Ltd. Liab. Corp. v. Great No. Ins. Co., 638 F.3d 476, 478 (5th Cir. 2011).
“To determine Mississippi law, we look to the final decisions of Mississippi’s
highest court.” Estate of Bradley ex rel. Sample v. Royal Surplus Lines Ins. Co.,
647 F.3d 524, 528-29 (5th Cir. 2011). We also review as persuasive authority the
decisions of the Mississippi Court of Appeals. See Herrmann Holdings, Ltd. v.
Lucent Techs., Inc., 302 F.3d 552, 558 (5th Cir. 2002).
This case presents a narrow but novel question. There was in 1999 an
administrative judge’s determination that the defendants should not have
denied disability benefits to Patrick. An award of temporary benefits was then
made. Once the time to challenge that decision ended, did the three-year period
begin in which to bring a civil suit alleging the prior bad faith denial of those
benefits even though a final decision on permanent benefits had not yet been
reached? Part I of our opinion draws from available Mississippi authorities to
conclude that the three-year period commenced in 1999. Thus, Patrick’s claim
that the initial denial was in bad faith is time-barred.
Part II of the opinion examines whether Patrick’s second amended
complaint presented claims that overcame the limitations bar. We agree with
the district court that the amended complaint failed under Twombly and Iqbal.
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I. Statute of Limitations
Both parties direct us to a decision by the Mississippi Supreme Court,
answering a certified question from this court. Bullock v. AIU Ins. Co., 995 So.
2d 717 (Miss. 2008). The question asked by the court was this:
Whether an order, issued in 1999, of a Mississippi Workers
Compensation Commission Administrative Law Judge which
determines only that the named employer and compensation insurer
are liable to the named employee for compensation benefits in
respect to a particular on the job accidental injury, but does not
determine the amount or duration of benefits to be paid or any other
matter, becomes final if not appealed by any party to the
Commission within twenty days; and, if so, whether the employee
claimant has then so exhausted his administrative remedies,
notwithstanding that the employee’s compensation case against the
employer and compensation insurer remains pending before the
Commission on other issues, such that the three year limitations
period under Miss. Code 15-1-49(1) then commences and continues
to run with respect to a subsequent suit by the employee against the
employer or compensation insurer for bad faith failure to pay
workers compensation benefits which does not allege any bad faith
action or inaction after the expiration of twenty days following the
ALJ’s referenced order finding compensability.
Bullock v. AIU Ins. Co., 503 F.3d 384, 388 (5th Cir. 2007).
The Mississippi Supreme Court concluded that such an order did not start
the limitation period. Bullock, 995 So. 2d at 723. Of aid to Patrick is the court’s
conclusion that the 1999 order was “interlocutory” because there were
“substantial rights that remained undetermined – and were specifically reserved
for later action.” Id. at 723. Patrick sees her situation as analogous because AJ
Thompson expressly reserved issues concerning permanent disability.
Defendants point out, though, that the Bullock court also explained that a
“decision to grant or deny a specific amount of compensation” made an AJ’s order
final with respect to the limitations period. Id. at 722. Because the 1999 order
here made a monetary award, they argue the statute of limitations began to run.
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When state law does not answer our precise question, we evaluate how the
state’s highest court would apply existing law to the new question; we must
avoid creating or modifying state law. Gilbane Bldg. Co. v. Admiral Ins. Co., 664
F.3d 589, 593 (5th Cir. 2011). Our certified question in Bullock asked whether
a claimant had exhausted administrative remedies for bringing a bad-faith claim
after the initial workers’ compensation order by an AJ was entered. Bullock, 503
F.3d at 388. The state court’s analysis relied primarily on the language of
relevant statutes. See Bullock, 995 So. 2d at 721-22.
The statute providing for an appeal from an AJ to the Commission states
that once an AJ decision to “make or deny an award” is filed, that decision
becomes final within 20 days unless a petition for review by the Commission is
submitted. Miss. Code Ann. § 71-3-47. Though the term “award” is not defined
in the workers’ compensation statutes, the Bullock court concluded that its
frequent use in those statutes is “associated with the grant of a monetary sum.”
Bullock, 995 So. 2d at 721. Consequently, “it is a decision making or denying
compensation, not a determination of liability or entitlement alone, which
constitutes an ‘award.’” Id. at 722. Therefore in Bullock, the first order by the
AJ left the question of awarding temporary or permanent benefits pending,
which made that decision interlocutory. Id. at 723.
We find useful interpretive assistance in a treatise on Mississippi workers’
compensation law. The exhaustion principle underlying Bullock “bears on
conduct (filing a lawsuit) that will take place totally outside the administrative
process and will not affect the continuing administrative process.” John R.
Bradley & Linda A. Thompson, Mississippi Workers’ Compensation § 11:30 at
612-13 (2011 ed.). Those authors, one of whom was the administrative judge
who issued the 1999 order in this case, state that the best way to understand the
terms final and interlocutory in Bullock are “as a window into exhaustion,”
which “is a markedly different principle from final-or-interlocutory as applied to
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the continuing administrative process. The words are the same; the music is
not.” Id. at 611. Among the potentially different consequences of “final” or
“interlocutory” are questions such as “whether an appeal is timely or is even
allowed at a particular time of the administrative proceedings,” and “whether an
employer is obligated by law at a particular time to pay benefits.” Id. at 612-13.
We agree with the insights of the treatise authors. We interpret Bullock as
saying that the failure to make an “award” as that court defined it – an order
that includes a grant of money – meant that the AJ’s decision was not final for
purposes of exhaustion. For this reason, precedents on finality for purposes of
appealability of orders do not assist in applying Bullock. E.g., Kukor v. Ne. Tree
Serv., Inc., 992 So. 2d 1242 (Miss. Ct. App. 2008).
Mississippi precedents before Bullock held the “determination that a
plaintiff [was] ‘entitled’ to compensation” was a prerequisite to initiating a bad-
faith action. Bullock, 995 So. 2d at 723; see also Bradley & Thompson, Workers’
Compensation § 11:30 at 612. A useful explanation of this is in a case discussing
the denial of certain medical services and supplies. Walls v. Franklin Corp., 797
So. 2d 973 (Miss. 2001). The court held that a worker could not bring “a bad
faith action for refusal to pay for disputed medical services and supplies absent
the Commission’s prior determination that those services and supplies were
reasonable and necessary.” Id. at 977.
We find Walls useful because the worker had a discrete claim for a specific
medical service that was allegedly denied in bad faith. The state court did not
dispute that a bad-faith claim for denial just of the medical service could be
brought, but held that the claim first required exhaustion at the Commission.
The Bullock court reaffirmed Walls and clarified that determining only that a
worker was entitled to medical services was insufficient for exhaustion; the
Commission must also make an award. Bullock, 995 So. 2d at 723.
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Therefore, the determination in 1999 that the defendants must pay
Patrick the specific monetary sums was a necessary event for commencing the
statute of limitations. Whether it is also sufficient depends on whether state law
suggests that all benefits must first be awarded, not just the initial and
temporary disability benefits that were awarded here. We note that in Walls,
the worker apparently was bringing the bad-faith claim of denial of certain
medical services after all other benefits had been paid. Walls, 797 So. 2d at 974-
75. Even so, the court did not suggest that all claims for benefits had to be
resolved at the Commission before any suit for bad faith could be brought.
It is true that in Bullock the court stated that the initial order by the AJ
was “interlocutory” in part because there were “substantial rights that remained
undetermined – and were specifically reserved for later action.” Bullock, 995 So.
2d at 723. The court seemingly meant no more, though, than what it just
finished concluding about the definition of “award”: an AJ decision remains
interlocutory for purposes of exhaustion of remedies until a monetary sum is
awarded. Id. at 721-22. Neither Bullock nor any other discovered precedent
suggests that exhaustion in this context requires that all potential benefits have
been awarded. Instead, a claim for bad faith in denying particular benefits is
exhausted when an award of those benefits is final.
Requiring all benefits to be awarded before the statute of limitation
commences is inconsistent with the manner in which workers’ compensation
benefits are determined and with the purposes of requiring timely suits. As
occurred here and as authorized by statute, there can be long delay between an
award of temporary benefits and an award of permanent ones. There also can
be, as in Walls, independent medical services being provided that may be
contested while the temporary or permanent benefits are also being paid. Delay
unconnected to the factual or legal finalization of that specific claim interferes
with the stated purposes for Mississippi’s statutes of limitations:
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The primary purpose of statutory time limitations is to compel the
exercise of a right of action within a reasonable time. These statutes
are founded upon the general experience of society that valid claims
will be promptly pursued and not allowed to remain neglected. They
are designed to suppress assertion of false and stale claims, when
evidence has been lost, memories have faded, witnesses are
unavailable, or facts are incapable of production because of the lapse
of time.
Miss. Dep’t of Pub. Safety v. Stringer,748 So. 2d 662, 665 (Miss. 1999) (quotation
marks and citation omitted). The primary claims being made here concern the
actions of the employer and carrier in 1997-1999, claims very much based on
facts that would need to be reconstructed by witnesses whose memories and
availability have become increasingly doubtful.
We conclude that the Bullock court, in referring to whether substantial
rights still needed to be determined was remarking on the fact that the issue of
liability or compensability for certain kinds of benefits is simply the threshold
to the complete determination of the entitlement to and amount of those
benefits. See Bullock, 995 So. 2d at 722-23.
The 1999 AJ order in this case was sufficient under Bullock to be an
“award.” The order granted temporary disability benefits. There was no effort
to seek Commission review, and the order became final in 20 days. There is a
statute granting the Commission continuing jurisdiction over a case, and awards
can be changed in certain circumstances. See Miss. Code Ann. § 71-3-53. What
impact that statute might at times have need not be resolved today. It is enough
to note that it provides that an award can be contested only for one year after
the last payment. Id. The 1999 order in our case only granted 11 months of
temporary benefits, and therefore even if exhaustion might be affected by this
re-evaluation provision, that right expired one year after final payment.
The claim for the initial benefits was fully exhausted not later than 2001.
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With the exhaustion issue settled, we next overlay the cause of action for
bad-faith refusal to pay benefits on top of the relevant statute of limitation to
determine when the limitations period began on the claim. A claim of bad-faith
refusal to pay workers’ compensation benefits has “three essential elements: (1)
a contract of workers’ compensation insurance existed between the defendant
and the plaintiff’s employer; (2) the carrier denied the plaintiff’s compensable
workers’ compensation claim without a legitimate or arguable reason; and (3)
the denial of benefits constitutes a willful and intentional or malicious wrong.”
AmFed Cos., LLC v. Jordan, 34 So. 3d 1177, 1183 (Miss. Ct. App. 2009) (quoting
Rogers v. Hartford Accident & Indem. Co.,133 F.3d 309, 312 (5th Cir.1998)).
When an employer or carrier refuses to pay statutory benefits “for no arguable
reason, such a failure is subject to being regarded as a bad-faith breach of
statutory duty.” Bradley & Thompson, Workers’ Compensation § 11:30 at 607.
The suit is one for an intentional tort arising from the act of non-payment.
Whitehead v. Zurich Am. Ins. Co., 348 F.3d 478, 481 (5th Cir. 2003).
Patrick needed to bring her claim within three years of the date the “action
accrued.” Miss. Code Ann. § 15-1-49. “Accrual” simply means that a cause of
action has become an enforceable claim. Owens-Illinois, Inc. v. Edwards, 573 So.
2d 704, 706 (Miss. 1990) (interpreting accrual under this same statute). AJ
Thompson in 1999 found that Patrick (i) suffered a work-related back injury, (ii)
was temporarily totally disabled, and (iii) was entitled to benefits of $187.01 per
week from the date of her injury to the time she was released by her doctor. The
first two enumerated elements of the claim – existence of a workers’
compensation policy and the denial of a claim for benefits – predated the AJ’s
order. Once administrative exhaustion was achieved by a final award of benefits
(and, possibly, by the passage of the time for reconsideration), all elements for
a bad-faith claim arising from the denial of those benefits existed.
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Patrick’s first amended complaint claimed that defendants refused to pay
“temporary disability benefits” in 1999 and complained that they had “put on no
proof during the hearing before Administrative Law Judge, Linda A. Thompson.”
Further, Patrick claimed that defendants had “no arguable reason [or] any
reasonable proof or evidence” contradicting her claim for compensation. The
claim initially set forth in the bad-faith suit came far too late.
Though the bad-faith claim for initial benefits is barred, Patrick argues
that her amended complaint was based on later awards. We turn to that issue.
II. Failure to State A Claim
In the second amended complaint, Patrick sought to bring an additional
cause of action for continuing bad faith arising after the 1999 order. The
defendants moved to dismiss, arguing these allegations were conclusory and
failed to comply with Rule 8(a)’s pleading requirements as explained by the
Supreme Court in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007), and
Iqbal, 556 U.S. at 677-79. To plead facial plausibility, a plaintiff must set forth
factual content that permits the courts to draw the reasonable inference that the
defendant is liable. Iqbal, 556 U.S. at 678. Patrick’s alterations added a
paragraph and modified another. In one instance of modification, she simply
added the phrase “before and after September 14, 1999 Order” to a charge that
defendants committed a willful and malicious wrong. This type of recital, which
fails to identify the specific time or nature of such wrongs, fails to suffice because
it “tenders naked assertions devoid of further factual enhancement.” Id.(quotation marks and citation omitted).
Patrick’s most detailed amendment was the addition of this paragraph:
24. Defendants have engaged in a continuing pattern of bad faith,
even after the issuance and entry of Judge Linda Thompson’s
September 14, 1999 Order, and in fact the Defendants, have among
other things, unreasonably delayed and/or denied authorization
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and/or payment of reasonable, necessary and worker’s comp related
medical treatment, as well as permanent indemnity benefits, as
ordered by the Mississippi Workers’ Compensation Commission and
affirmed by the Mississippi Court of Appeals.
This paragraph invokes three potentially cognizable theories of liability.
First, “[a]n unreasonable delay in resolving a claim can qualify as recoverable
bad faith.” Jordan, 34 So. 3d at 1183 (emphasis added). Second, a bad-faith
claim can be maintained if the employer or insurer fails to pay “reasonable and
necessary medical services and supplies.” Walls, 797 So. 2d at 976 (citing Miss.
Code Ann. § 71-3-15 (2000)). Third, just like the temporary denial already
analyzed, her mention of a permanent benefit denial could be actionable. See
Liberty Mut. Ins. Co. v. McKneely, 862 So. 2d 530, 533 (Miss. 2003).
The “tenet that a court must accept as true all of the allegations contained
in a complaint is inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678.
Although Patrick argues the defendants delayed and denied payment for medical
treatment the AJ ordered, her amendment is devoid of facts to make it plausible
and amounts to a “[t]hreadbare recital[] of the elements of a cause of action,
supported by mere conclusory statements.” Id. She does not identify by date or
amount or type of service, any of the alleged bad-faith denials and delays.
Patrick offers no “factual content allow[ing] [this] court to draw the reasonable
inference” that Wal-Mart or National Union responded in bad faith to her claim
for permanent benefits. Amacker, 657 F.3d at 254 (quotation marks and citation
omitted).
Finally, Patrick alleges the district court erred in denying her leave to
amend a third time. A plaintiff is entitled only to one amendment as of right;
further opportunities are committed to the sound discretion of the trial court.
United States ex rel. Willard v. Humana Health Plan of Tex. Inc., 336 F.3d 375,
387 (5th Cir. 2003). Although Rule 15(a) embodies a liberal spirit, denial is
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warranted in the face of “repeated failure[s] to cure deficiencies by amendments
previously allowed.” Id. at 386 (quoting Foman v. Davis, 371 U.S. 178, 182
(1962)). In addition, she did not motion for leave to amend, but instead asked
in her opposition to dismissal for an opportunity to “state said facts with greater
specificity.” The district court did not need to entertain this type of “nested
request[] for amendment.” Cent. Laborers’ Pension Fund v. Integrated Elec.
Servs., Inc., 497 F.3d 546, 556 (5th Cir. 2007).
Patrick’s original claim is barred by Mississippi’s three-year statute of
limitations. Her new allegations as to a continuing violation and other instances
of bad faith do not state a claim. Thus, the district court properly dismissed the
entirety of her second amended complaint.
AFFIRMED.
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