Ellis v. Commissioner of the Department of Industrial Accidents

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13-P-402 Appeals Court
JAMES ELLIS1 vs. COMMISSIONER OF THE DEPARTMENT OF INDUSTRIAL
ACCIDENTS & another.2
No. 13-P-402.
Suffolk. October 10, 2013. - September 18, 2015.
Present: Berry, Green, & Trainor, JJ.
Workers' Compensation Act, Lump-sum settlement, Attorney's fees.
Administrative Law, Judicial review. Practice, Civil,
Frivolous action.
Civil action commenced in the Superior Court Department on
May 28, 2008.
The case was heard by Geraldine S. Hines, J., on a motion
for summary judgment.
Teresa Brooks Benoit for the plaintiff.
Timothy J. Casey, Assistant Attorney General, for
Commissioner of the Department of Industrial Accidents.
Michael K. Landman, for Landman, Akashian & White, P.C.,
was present but did not argue.
1
Doing business as Ellis & Associates.
2
Landman, Akashian & White, P.C., as a reach and apply
defendant.
2
BERRY, J. Reduced to essentials, in this latest appellate
foray, the plaintiff, James Ellis, contends that, in considering
whether to approve a lump sum agreement under § 48 of G. L.
c. 152, the Workers' Compensation Act (act), for injuries to a
worker, an administrative judge of the Department of Industrial
Accidents (department) or a law judge on the department's
reviewing board (reviewing board) (hereinafter collectively
referred to as administrative judge) is absolutely foreclosed
from reviewing the authenticity of the legal expenses and from
adjusting those expenses downward, leaving more money for the
injured worker under the lump sum settlement payment.
We reject Ellis's contentions regarding total
unreviewability of the claimed legal expenses. Ellis offers no
precedent, i.e., no caselaw or statutory authority, for this
proposition. See note 8, infra. We conclude that an
administrative judge -- in review of a proposed lump sum awarded
and to be paid in settlement to an injured worker -- does have
the authority to review and adjust downward unsubstantiated or
unreasonably excessive attorney's fees and expenses. Put
another way, it is within the purview of an administrative judge
to modify the amount allocated in the lump sum settlement to an
employee's attorney for attorney's fees and necessary expenses
where the fees and expenses, upon review, are insufficiently
supported or deemed not necessary, and the administrative judge,
3
by such an adjustment, neither increases the burden on the
insurer nor decreases the net sum to be paid to the employee.
In the past five years alone, Ellis or his legal assistants
(collectively, Ellis) have filed over one hundred and fifty
workers' compensation appeals in this court. In a substantial
number of these appeals, Ellis also sought further appellate
review in the Supreme Judicial Court where this court decided
the appeals adversely to the contentions advanced. Ellis's
attorney's fees and expenses frequently have been the main
subject in these appeals.3 In a series of these cases, Ellis has
3
See, e.g., Ellis v. OneBeacon Ins. Group, 76 Mass. App.
Ct. 1115 (2010) (taking frivolous position that Ellis's attorney
lien supersedes Division of Medical Assistance lien); Cordeiro's
Case, 76 Mass. App. Ct. 1117 (2010) (challenging entitlement of
predecessor attorney to fees even though Ellis had segregated
fee for counsel in settlement); Ryder's Case, 80 Mass. App. Ct.
1102 (2011) (affirming denial of attorney's fees where Ellis's
motion to recuse was denied and thereafter Ellis refused to
submit evidence to support his claim for portion of fees
allocated in lump sum settlement); Derosiers's Case, 81 Mass.
App. 1130 (2012) (sole issue is denial of attorney's fees);
Stepien's Case, 81 Mass. App. Ct. 1132 (2012) (challenging
reduction of attorney's fees that was done in accordance with
statutory factors); Perry's Case, 82 Mass. App. Ct. 1102 (2012)
(arguing attorney's fees and costs due even though insurer made
settlement offer upon receipt of impartial medical examiner's
report but Ellis did not accept it until day before rescheduled
§ 36 hearing).
In addition, Ellis has filed a spate of appeals in which he
refused insurers' offers of full payment in the apparent hopes
of getting attorney's fees and then pursued the fee issue on
appeal even when the insurer was ordered to pay only the amount
offered. See, e.g., Packard's Case, 76 Mass. App. Ct. 1115(2010); Txicanji's Case, 76 Mass. App. Ct. 1123 (2010); Wong's
Case, 76 Mass. App. Ct. 1126 (2010); Derosiers's Case, supra;
4
been sanctioned for filing frivolous appeals and, similarly, for
presenting frivolous claims involving fees and expenses before
the department.4,5
Against this backdrop, this appeal from a Superior Court
judgment -- again rejecting Ellis's makeshift contentions
Mahoney's Case (No. 1), 81 Mass. App. Ct. 1135 (2012); Perry's
Case, supra.
4
See, e.g., Santelli's Case, 78 Mass. App. Ct. 1119 (2011)
(Ellis sanctioned for filing baseless claim against another
attorney in division of attorney's fee dispute between them);
Neal's Case, 80 Mass. App. Ct. 1108 (2011) (affirming
department's assessment of costs against Ellis for advancing
frivolous claim where Ellis unreasonably refused offer of full
payment because insurer would not send check directly to Ellis
without authorization from employee); AIM Mut. Ins. Co. v.
Okraska, 81 Mass. App. Ct. 1106 (2011) (frivolous appeal of
denial of attorney's fees resulted in claimant Ellis being
ordered to pay insurer's appellate attorney's fees); McCarty's
Case, 81 Mass. App. Ct. 1114 (2012) (awarding double costs of
appeal for frivolous appeal by Ellis where claims had already
been adjudicated and were barred by res judicata); Vasilenko's
Case, 83 Mass. App. Ct. 1124 (2013) (insurer's award of
appellate attorney's fees taxed on Ellis where there could be no
reasonable expectation of reversal on appeal).
5
In Ellis v. Travelers Indem. Co., 77 Mass. App. Ct. 1104(2010), a decision issued pursuant to our rule 1:28, we observed
that a Superior Court judge noted twenty-seven cases filed in
Superior Court in 2008 in which Ellis failed to exhaust his
administrative remedies and brought actions in an effort to
recover costs, demonstrating "a wilful design to circumvent the
[department] primary jurisdiction, to procure payment for
unsubstantiated expenses (which usually exceed the attorney's
fee ordered), and to obtain begrudging capitalization from the
insurers, who are apt to settle the vexatious cases rather than
incur additional attorney's fees." We affirmed the judgment
awarding the insurer attorney's fees and costs pursuant to G. L.
c. 231, § 6F, and awarded appellate attorney's fees and costs.
In addition, we referred the matter to the Board of Bar
Overseers where disciplinary proceedings are now pending.
5
regarding "necessary expenses" -- presents yet another
unsustainable effort by Ellis to manipulate the workers'
compensation system to Ellis's financial advantage vis-à-vis
legal expenses.
Ellis's contention that attorney's fees and expenses are
nonreviewable -- even if unnecessary or unsubstantiated -- is
contrary to best interests of injured employees, and is at odds
to the very purposes served by the act. "It has long been
recognized that the [a]ct 'was enacted as a "humanitarian
measure" in response to strong public sentiment that the
remedies afforded by actions of tort at common law did not
provide adequate protection to workers.'" Spaniol's Case, 466
Mass. 102, 106 (2013), quoting from Neff v. Commissioner of the
Dept. of Industrial Accs., 421 Mass. 70, 73 (1995).
We are mindful that legal representation of injured
employees is an important part of the workers' compensation
statutory and regulatory scheme, and that payment of attorney's
fees and expenses are specifically provided for at various
stages of proceedings before the department and the courts.6
However, fees and expenses for appropriate legal representation
is not a carte blanche to an open credit line for an attorney to
draw upon without validity. Particularly is this so where, as
6
As to the framework for review of a lump sum settlement
and necessary attorney's fees and expenses, see part 2, infra.
6
here, the attorney-related expenses have not been shown to be
reasonable or actually incurred. Indeed, in this case, Ellis
failed to provide to the department and the lower court
appropriate documentation for these expenses, certain of which
were deemed unreasonable and excessive.7
Oversight of the allocation to an attorney of attorney's
fees and necessary expenses is an important part of the task of
an administrative judge in approving a lump sum settlement
agreement. Particularly is this so because the fees and
expenses in a lump sum settlement differ in allocation from
other, necessary fees and expenses awardable in other contexts,
which under the act may be payable to an attorney directly by
the insurer. See G. L. c. 152, § 13A(1)-(7). In contrast, in a
lump sum settlement agreement, attorney's fees and expenses are
paid from the very lump sum settlement deemed due to the injured
worker. It is illustrative to view the legal setting of a lump
sum settlement arrangement. Once the insurer agrees to payment
of a sum certain lump sum settlement, the insurer has little
incentive to scrutinize the attorney's fees and expenses
submitted by the employee's attorney. Further, the injured
employee would be placed in an awkward position, if called upon
7
Ellis does not contend on appeal that he submitted
documentation sufficient to support the amount of "necessary
expenses" allocated to him in the Michael X. Smith and Brian
Tape settlements. The record is devoid of any such
documentation.
7
to contest the fees and expenses of the attorney who has
represented that employee through the settlement process. Thus,
it is the impartial administrative judge who stands as the
overseer to the fairness and propriety of the lump sum
settlement and the fees and expenses incorporated therein. See
G. L. c. 152, § 48.
1. Procedural background. The appeal involves prior
proceedings in two workers' compensation cases litigated during
2008, in which Ellis represented employees seeking workers'
compensation for injuries sustained at work.
The first case involves Michael X. Smith. Smith and the
insurance company reached agreement as to a lump sum of $50,000
after Smith had reached maximum medical improvement to
compensate him for lingering effects of a tibia-fibula fracture,
including persistent pain and limitation. The agreement
provided for attorney's fees of $7,500, and expenses of
$3,574.31. The agreement was submitted to an administrative
judge for approval pursuant to G. L. c. 152, § 48. The
administrative judge approved the agreement but modified it by
withholding payment of the expenses pending documentation, and
ultimately approved only $1844.31 in expenses and awarded the
balance of $1730 to the employee. The administrative judge
denied expenses that were related to pursuing a psychological
injury that was not part of the settlement. The record does not
8
contain the documentation or other evidence provided to the
administrative judge related to the expenses incurred.
The second case involves Brian Tape, who had injured his
right ankle at work. The parties entered an agreement for a
lump sum of $15,000 and future medical expenses, from which
attorney's fees of $3,000 and expenses of $3,484.73 were to be
paid. The administrative judge approved the settlement pursuant
to § 48, but modified the expenses arrangement by releasing the
full amount of the expenses to the employee to disburse "to his
counsel as he deems appropriate."
Of note in both cases, neither the injured employees nor
the compensation insurers filed appeals concerning the lump sum
settlement with the adjusted fees. "Once the department gives
its approval of the parties' lump sum agreement pursuant to
§ 48, 'further inquiry' of the merits of the controversy must be
had in Superior Court." Opare's Case, 77 Mass. App. Ct. 539,
541 (2010), quoting from Perkins's Case, 278 Mass. 294, 299
(1932).
Ellis did not seek any such "further inquiry" or direct
appellate review in either case. Instead, acting solely on his
own behalf and in his interests -- and without joining either
the insurer or injured employee -- Ellis filed an independent
declaratory judgment lawsuit in the Superior Court.
Specifically, Ellis, acting in his own name and doing business
9
as Ellis & Associates, commenced in the Superior Court a G. L.
c. 231A declaratory judgment complaint coupled with a claim in
equity to reach and apply against insurer's counsel. The
declaration sought in the Superior Court -- tracking the
position Ellis continues to advance in this appeal -- is that an
administrative judge is prohibited from considering attorney's
fees and expenses embedded in a lump sum settlement; and that
under G. L. c. 152, § 19, the administrative judge's only
recourse in the event that he finds that a lump sum agreement is
not in the best interests of the employee is to reject the
settlement as a whole.
A Superior Court judge rejected Ellis's contentions. The
judge correctly reasoned -- a rationale which we adopt in this
appeal -- that administrative judges "have the power to adjust
Lump Sum Agreements in favor of claimants pursuant to their
responsibility under G. L. c. 152, § 48[] to ensure that
settlement is in the claimant's 'best interests,'"8 provided that
the administrative judge may neither increase the amount due
from the insurer, nor reduce the amount due to the employee.9
8
Ellis also argued that the department denied his property
right to reimbursement for expenses without due process of law.
Ellis does not pursue this dubious argument on appeal, and in
any event, it is waived.
9
At the outset there is also a patent flaw in Ellis being
the sole plaintiff seeking such a declaratory judgment. General
Laws c. 231A, § 8, inserted by St. 1945, c. 582, § 1, provides,
10
2. The framework for a lump sum settlement and
administrative review. The act allows an employee and an
employer or insurer to settle part or all of a claim for
workers' compensation through a lump sum settlement, which, when
presented to an administrative judge, as was done here, is not
perfected "until and unless approved by an administrative judge
or administrative law judge as being in the claimant's best
interest." G. L. c. 152, § 48(1), as amended by St. 1991,
c. 398, § 74. "Central to c. 152's statutory scheme is the
Legislature's command that the department have oversight
responsibility over lump sum settlements in order to ensure that
any such settlement is 'in the claimant's best interest.'"
Opare's Case, 77 Mass. App. Ct. at 541, quoting from G. L.
c. 152, § 48. "'The determination of a lump sum [settlement]
calls for a careful scrutiny of the evidence, the exercise of
sound judgment and good practical sense, so that the amount will
be as near as possible to the present value of all the
compensation payments which the employee would be entitled to
receive in the future.' Paltsios's Case, 329 Mass. 526, 529
(1952). The approval process under § 48 is designed to serve
"When declaratory relief is sought, all persons shall be made
parties who have or claim any interest which would be affected
by the declaration, and no declaration shall prejudice the
rights of persons not parties to the proceeding."
11
that exacting inquiry." Opare's Case, 77 Mass. App. Ct. at 542
n.6.
There is no provision in the act that the "necessary
expenses" allocated to an employee's attorney as part of a lump
sum settlement, once submitted to an administrative judge for
approval, are exempt from this scrutiny. General Laws c. 152,
§ 13A(8)(b), provides that once a lump sum settlement is
reached, attorney's fees, which are to be paid from the
settlement, may not exceed twenty percent of the lump sum
settlement. Twenty percent is an upper limit, not a lock box
that bars review into the box. While the act does not refer to
costs, § 13A(10), inserted by St. 1991, c. 398, § 35, states
that the department "shall provide by rule the necessary
expenses that are reimbursable under this section," and
reasonably necessary expenses have traditionally been allowed.
Pursuant to 452 Code Mass. Regs. § 1.19(2) (2013), any
employee's attorney entitled to a fee under G. L. c. 152, § 13A,
shall submit to the administrative judge or reviewing board an
itemization of reasonable and necessary expenses and
disbursements, and the insurer shall pay those expenses approved
by the administrative judge or reviewing board. See 452 Code
Mass. Regs. § 1.02 (2008) (defining "necessary expenses").
In an alternative approach, Ellis advances an "all or
nothing" proposal as follows. Ellis contends that, even if an
12
administrative judge is authorized to review the "necessary
expenses," § 19 of the act requires the administrative judge to
reject the settlement as a whole, if the judge finds that the
allocation for "necessary expenses" is not necessary, not
supported, or excessive. We are aware of no authority to
support this all-or-nothing approach. Furthermore, Ellis has
not cited authority by caselaw or statute that suggests that an
employee's counsel is a "party" to a lump sum settlement
agreement pursuant to § 48 and § 19 such that the reduction of
the "necessary expenses" component of the lump sum settlement
requires an administrative judge to reject the agreement as a
whole. See Pinto v. Aberthaw Constr. Co., 418 Mass. 494, 497
n.2 (1994) (attorneys signing third-party settlement agreement
in capacities as counsel for insurer and employee not "parties"
to settlement agreement). Section 19, applicable to agreements
in general, is incorporated by reference into § 48. See
Bertocchi's Case, 58 Mass. App. Ct. 561, 563-564 (2003).
3. The thrust of Ellis's frivolous litigation. As
previously noted, and as the host of Ellis's litigated cases
compiled by citation in the beginning of this opinion show, this
appeal is just one small part of a pattern of Ellis's frivolous
litigation in advancing legally unfounded claims on appeal.
"[W]e will not hesitate to award attorney's fees and costs
against counsel in appropriate cases." Hough's Case, 82 Mass.
13App. Ct. 1121 (2012). See Donovan's Case, 81 Mass. App. Ct.
1108 (2012).10 In Donovan, we described the appeal as
"meritless, redundant of the prior appeal, assaultive upon the
integrity of the participants in the underlying administrative
scheme, and wasteful of the private resources of the opposing
party and of the public resources of the [department] and of the
Appeals Court. It qualifies as thoroughly frivolous within the
meaning of Mass.R.A.P. 25, as appearing in 376 Mass. 949(1979)." Ibid.Under this standard, this appeal is frivolous and worthy of
sanctions. As with Ellis v. Travelers Indem. Co., 77 Mass. App.
Ct. 1104 (2010), see note 3, supra, we refer this case to the
Board of Bar Overseers.
Judgment affirmed.
10
Although our rule 1:28 decisions are not precedent, they
may be cited for their persuasive value. See Chace v. Curran,
71 Mass. App. Ct. 258, 260 n.4 (2008). We cite the 1:28
decisions here as part of the Ellis litigation history.