Belling v. Emp't Sec. Dep't

This opinion wasfiled for record
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/ IN CLERKS OFFICE
8UPRE?n , SUPREME COURT CLERK
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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 Wash. 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 Wash. 2d 869, 877, 31 P.3d 1164(2001)(citing
Bowles V. Dep't ofRet. Sys., 121 Wash. 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 Wash. 2d 251, 271, 138
P.3d 943(2006){citmgBowles, 121 Wash. 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 Wash. 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 Wash. 2d 422, 426,686 P.2d 483 (1984); Penn. Life Ins. Co. v. Dep'tof
Emp'tSec., 97 Wash. 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 Wash. 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 Wash. 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 Wash. 2d 643, 649-
650, 272 P.3d 802(2012)(citing Hamm v. State Farm Mut. Auto. Ins. Co.,
151 Wash. 2d 303, 88 P.3d 395 (2004); Winters, 144 Wash. 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 Wash. 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 Wash. 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 Wash. App. 565, 575, 200 P.3d 281 (2009)
(citing Wash. Waste Sys., Inc. v. Clark County, 115 Wash. 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 Wash. 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 Wash. 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 Wash. App. at 575 (citing Wash. Waste Sys., Inc., 115 Wash. 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
Wash. 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 Wash. 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 Wash. 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 Wash. App.
565, 575, 200 P.3d 281 (2009)(citing Wash. Waste Sys., Inc. v. Clark County, 115
Wash. 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
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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.
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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
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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.
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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 Wash. 2d 422,686 P.2d 483(1984)and Pennsylvania Life Insurance
Co. V. Department ofEmployment Security, 97 Wash. 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 Wash. 2d at
417; Rhoad, 102 Wash. 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 Wash. 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
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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.
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BellingV. Emp'tSec. Dep't, 95097-1 (Stephens, J., dissenting)
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