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Olsen Logging Co. et al v. D. Lawson et al (5/15/92), 832 P 2d 174
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Notice: This is subject to formal correction before
publication in the Pacific Reporter. Readers are
requested to bring typographical or other formal errors
to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, in order that
corrections may be made prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
OLSEN LOGGING COMPANY and )
CIGNA COMPANIES, ) Supreme Court No. S-3916
)
Petitioners, )
) Trial Court No.
v. ) 1JU-90-449 Civil
)
DAVID B. LAWSON, SILVER BAY ) O P I N I O N
LOGGING and ALASKA TIMBER )
INSURANCE EXCHANGE, )
) [No. 3840 - May 15, 1992]
Respondents. )
______________________________)
Petition for Review from the Superior
Court of the State of Alaska, First Judicial
District, Juneau, Rodger W. Pegues, Judge.
Appearances: BethAnn Boudah Chapman,
James R. Webb, Faulkner, Banfield, Doogan &
Holmes, Juneau, for Petitioners. Terri L.
Herring-Puz, Welch & Condon, Tacoma, and
Patrick E. Murphy, Batchelor, Murphy &
Brinkman, Juneau, for Respondent Lawson.
Paul M. Hoffman, Robertson, Monagle &
Eastaugh, Juneau, for Respondents Silver Bay
Logging and Alaska Timber Insurance Exchange.
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton, and Moore,
Justices.
MATTHEWS, Justice.
BURKE, Justice, dissenting in part.
In this case we review an interlocutory order of the
superior court refusing to stay the enforcement of a lump sum
workers' compensation award during an appeal of the award to the
superior court.1 We hold that the request for a stay was
improperly denied.
I.
The Alaska Workers' Compensation Board set aside a 1973
compromise and release between David B. Lawson and his employer,
Olsen Logging Company. As a result of the set aside, the Board
determined that Olsen should pay Lawson a lump sum award of
$176,054.87, for past compensation due plus interest. In
addition, the Board awarded Lawson ongoing permanent total
disability benefits at the weekly rate of $107.50, with credit
for disability compensation already paid.
Olsen and its insurance carrier, CIGNA Companies,
sought to stay the lump sum award pending an appeal of the
Board's decision to the superior court.2 See Appellate Rule
603(a)(3). The superior court denied the stay. Relying upon the
Board's finding that Lawson was permanently totally disabled, the
court found Lawson "financially irresponsible." The court then
found that Olsen had failed to show "the existence of the
probability that the merits of the appeal [would] be decided
adversely to [Lawson]." In reaching its decision, the superior
court applied the two-part approach which we articulated in Wise
Mechanical Contractors v. Bignell, 626 P.2d 1085, 1087 (Alaska
1981). We granted Olsen and CIGNA's petition for review to
address the propriety of the trial court's action. After hearing
oral argument, we ordered the parties to submit supplemental
briefing on the question of whether we should adopt a more
lenient standard for stays of lump sum workers' compensation
awards.
II .
In Johns v. State, Dep't of Highways, 431 P.2d 148
(Alaska 1967), we determined that a showing of "financial
irresponsibility"alone was insufficient to obtain a stay of a
workers' compensation award. Probable success on the merits of
the appeal also had to be demonstrated:
To warrant the superior court's
enjoining of payments in whole, or in part,
the employer must produce evidence not only
of the claimant's insolvency (or financial
irresponsibility) but must also demonstrate
the existence of the probability that the
merits of the appeal will be decided
adversely to the claimant.
Johns, 431 P.2d at 151.
This holding was reiterated in Bignell:
[T]he employer must make a showing of
"irreparable damage"in order to obtain a
stay. We interpret[] the statutory term
"irreparable damage"to require a showing
both of the financial irresponsibility of the
claimant and the existence of the probability
that the merits of the appeal will be decided
adversely to him.
626 P.2d at 1087.
III .
Our standards for a stay of a Compensation Board award
evolved from the equitable standards for issuance of an
injunction. Johns, for example, involved the proper
interpretation of AS 23.30.125(c) which in 1967 and presently
uses language of injunction for stays on appeal. See Johns, 431
P.2d at 149-50. Although Appellate Rule 603 now controls stays,
there is a direct line of development from the injunction
procedure in AS 23.30.125(c) to the current rule. Bignell, 626
P.2d at 1087. Indeed, the "irreparable damage"component of the
statute (expanded in Bignell and Johns to include the probability
of success on the merits requirement) was incorporated into Rule
603. See Appellate Rule 603(a)(3). Motions for stays under Rule
603 are, therefore, much like motions for preliminary
injunctions.
The bifurcated approach to preliminary injunctions that
we adopted in A.J. Industries, Inc. v. Alaska Public Service
Comm'n, 470 P.2d 537 (Alaska 1970), modified in other respects,
483 P.2d 198 (Alaska 1971), therefore provides guidance for
motions for stays:
[T]he rule requiring a clear showing of
probable success applies in situations where
the party asking for relief does not stand to
suffer irreparable harm, or where the party
against whom the injunction is sought will
suffer injury if the injunction is issued,
[but] a different rule applies where the
party seeking the injunction stands to suffer
irreparable harm and where, at the same time,
the opposing party can be protected from
injury. . . .
. . . .
This approach is termed the
"balance of hardships"approach. The balance
of hardships is determined by weighing the
harm that will be suffered by the plaintiff
if an injunction is not granted, against the
harm that will be imposed upon the defendant
by the granting of an injunction. . . .
. . . if [the
balance of hardships tips decidedly
toward the plaintiff], it will
ordinarily be enough that the
plaintiff has raised questions
going to the merits so serious,
substantial, difficult and
doubtful, as to make them a fair
ground for litigation and thus for
more deliberate investigation."
Id. at 540-41 (footnotes omitted) (quoting Hamilton Watch Co. v.
Benrus Watch Co., 206 F.2d 738, 740 (2d Cir. 1953)). We have
since expressed the balance of hardships approach as follows:
That standard [that the movant must show
only that there are serious and substantial
questions going to the merits of the case]
. . . applies only where the injury which
will result from the temporary restraining
order or the preliminary injunction can be
indemnified by a bond or where it is
relatively slight in comparison to the injury
which the person seeking the injunction will
suffer if the injunction is not granted.
Where the injury which will result from the
temporary restraining order or the
preliminary injunction is not inconsiderable
and may not be adequately indemnified by a
bond, a showing of probable success on the
merits is required before a temporary
restraining order or a preliminary injunction
can be issued.
State v. United Cook Inlet Drift Ass'n, 815 P.2d 378, 379 (Alaska
1991) (citations omitted). See also Messerli v. State, Dep't of
Natural Resources, 768 P.2d 1112, 1122 (Alaska 1989).
If the balance of hardships approach were applied to
stays of workers' compensation awards, it would almost invariably
result in application of the "probability of success on the
merits" standard when the award consists of ongoing periodic
disability payments on which an employee relies as a salary
substitute. The employee is presumed to be inadequately
protected in this situation because the hope of a future award is
a meager substitute for life's daily necessities. This is the
justification for the rule that in order to obtain a stay in such
cases, the employer must show both irreparable damage and the
probability of success on the merits. Bignell, 626 P.2d at 1087.
However, in most cases involving lump sum awards the
balance is different. The employee can be adequately protected
and the employer generally stands to suffer the greater hardship.
In both periodic payment and lump sum payment cases, a super
sedeas bond will insure payment if the employee prevails on
appeal. However, an employee is usually not dependent on lump
sum awards for his daily living expenses. On the other hand, the
employer's opportunity to recover amounts paid the employee is
either limited or non-existent, even if the employee is
financially able to repay them.
Alaska Statute 23.30.155 (j) provides that an employer
who makes an overpayment to an employee can only recover the
overpayment out of future installments of compensation due,
twenty percent out of each installment. In Croft v. Pan Alaska
Trucking, Inc., 820 P.2d 1064, 1066 (Alaska 1991), we interpreted
this statute to be the exclusive remedy available to an employer
to recoup a previously paid award following a successful appeal.
Thus, where an employer is forced to make a lump sum payment and
will not, if successful on appeal, have an obligation to make
continuing payments of compensation, the employer is without a
remedy to recover the lump sum payment. In this situation, the
employer's harm is not only irreparable but an appeal becomes a
meaningless exercise since, win or lose, the money once paid can
never be recovered. These considerations require that the lesser
"serious and substantial questions"standard be used where a lump
sum award is sought to be stayed.3
Since the trial court has already decided petitioners'
appeal on the merits, there is no longer any need for a stay
pending appeal to the superior court. Our own order staying the
lump sum award pending consideration of this petition is hereby
VACATED.
BURKE, Justice, dissenting in part.
I agree that the request for stay was improperly denied
in this case. However, I would revise the interpretation of
"irreparable damage" which we embraced in Wise Mechanical
Contractors v. Bignell, 626 P.2d 1085 (Alaska 1981). Bignell and
Johns v. State, Dep't of Highways, 431 P.2d 148, 151 (Alaska
1967), established a two-prong test for stays of workers'
compensation. The test requires a showing of both the employee's
financial irresponsibility and the probability that the
employer's appeal will succeed on the merits. While this
standard is adequate for most situations, the two prongs should
not have been stated as elements of "irreparable damage," as
Bignell suggests. Bignell, 626 P.2d at 1087; see also Johns, 431
P.2d at 151. "Irreparable damage"is unquestionably a term of art
describing one of the equitable requirements for injunctive
relief. The "irreparable injury"requirement should not be
conflated with the separate and distinct "likelihood of success
on the merits"requirement.
Separating these two requirements results in a more
straightforward analysis and allows for a proper focus on the
balance of equities in a given case. The majority maintains that
the A.J. Industries balance of hardship standard "provides
guidance for motions for stays." Rather than merely using the
balance of hardship approach for guidance, I would adopt this
standard and make the rules governing the issuance of stays in
workers' compensation cases the same as the rules for the
issuance of preliminary injunctions.
I would also preserve the trial judge's discretion to
decide these motions on a case by case basis. The trial court
should consider the nature of the award at issue, as well as the
full effect on the parties of a denial or a grant of the
requested stay, before determining whether to employ the "serious
and substantial questions" standard or the "probability of
success on the merits"standard. I believe that this methodology
is preferable to a general rule on "lump sum payments" and is
better suited to the equitable nature of the proceeding. Some
lump sum awards will not be large. A stay of payment on a
relatively small award may work hardship on an employee.
Rigorous application of the balance of hardships test will weed
out such cases from cases at the other extreme such as Lawson's,
which involve an unusually large lump sum award to an employee
already regularly receiving maximum benefits.
_______________________________
1 Appellate Rule 603(a)(3) provides:
An employer appealing to the superior
court from a judgment of the Alaska Workers'
Compensation Board may obtain a stay of the
judgment pending the appeal by complying with
subparagraph (a)(2) [procedural requirements
regarding supersedeas bonds and other matters] and
by establishing that irreparable damage will
result if the stay is not granted.
2 Olsen and CIGNA did not seek a stay of the prospective
disability payments.
3 We note that while this standard is less favorable to the
employee than the probable success on the merits standard, it is
nonetheless more favorable than that which prevails in money
judgments in civil litigation where a stay is a matter of right
merely on the approval of a supersedeas bond. Appellate Rule
603(a)(2).
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