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Williams v. Utility Equipment, Inc. (8/14/92), 837 P 2d 1112
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
LESLIE WILLIAMS, ) Supreme Court File Nos.
) Superior Court File No.
Appellant, ) 3KO-89-96 Civil
v. ) O P I N I O N
UTILITY EQUIPMENT, INC., )
Appellee. ) [No. 3875 - Aug. 14, 1992]
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Kodiak, Peter A. Michalski, Judge.
Appearances: Steven D. Smith,
Anchorage, and George Vogt, Kodiak, for
Appellant. Joan M. Unger, Richmond & Quinn,
Anchorage, for Appellee. Patricia L. Zobel
and David Floerchinger, Staley, DeLisio, Cook
& Sherry, Inc., Anchorage, for Amicus Curiae
Alaska Rural Electric Cooperative
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton and Moore, Justices.
In this products liability action, Leslie Williams
challenges several of the trial court's evidentiary rulings and
argues that the court erred in denying his motion for a new
trial. In a separate appeal, Williams challenges the court's
determination that defendant Utility Equipment had the right to
satisfy its attorney fee award from the proceeds of a pretrial
settlement with two other defendants. The trial court found that
Utility Equipment's right to these funds was superior to both
Williams' attorneys' rights under Alaska's attorney lien statute
and Williams' employer's rights under the Alaska Workers'
We affirm the court's order denying a new trial but
reverse, in part, its order disbursing the settlement funds. We
believe that the trial court properly determined that Utility
Equipment's Rule 82 award is a "cost of litigation"which must be
deducted from the settlement funds held in trust by Williams'
attorneys before Williams' employer may obtain reimbursement
under AS 23.30.015(g). However, we hold that Utility Equipment's
right to satisfy its fee award out of the settlement funds is
subordinate to the lien held by Williams' attorneys under AS
I. Facts and Proceedings
On December 15, 1987, Leslie Williams, an employee of
Kodiak Electric Association ("KEA"), suffered a back injury in
the course of his employment as he was preparing his truck for a
service run. He applied for and has regularly received workers'
During the course of this litigation, Williams'
accounts of his accident have not been entirely consistent. In
the accident report he filed with his employer on the day of his
injury, Williams attributed the accident to icy conditions as he
got off the truck. He wrote "stepping out of bucket truck and
onto the snow and icy ground, balance and footing was lost."In a
workers' compensation report filed the following day, he wrote
"slipped and fell on ice while carrying things."
About a month later, Williams consulted two doctors for
his back pain. Both doctors' records indicate that Williams
stated that his injuries were caused when he fell from a truck.
In March 1988, Williams consulted a lawyer regarding
possible liability for his injuries. A year later, Williams
filed a products liability action against Utility Equipment,
Kodiak Motors and Service Manufacturing, the manufacturers and
distributors of the allegedly defective truck bed. Williams
claimed that he fell off the truck due to the defective placement
of the locking controls which prevented clear access to the
controls. He sought damages for past and future loss of income
in an amount in excess of $100,000.
During discovery, Williams admitted in his deposition
that he had had problems with substance abuse, but also stated
that he had successfully completed a court ordered treatment
program in 1976, and had not used illegal drugs in the last five
years. In a signed affidavit, Williams swore that he was not
under the influence of drugs or alcohol at the time he fell from
the truck. He also clarified the statements he made in his
deposition about illegal drug use during the past five years. He
admitted having recently procured a portion of a friend's
prescription for Dilaudid, a strong narcotic. Williams
subsequently filed a motion asking the court to prohibit Utility
Equipment from using evidence of his drug use to imply negligence
or bad character.1
Prior to trial, Williams settled with Service
Manufacturing for $50,000. Most of the settlement funds were
divided between Williams' attorneys and Alaska Rural Electric
Cooperative Association ("ARECA"), KEA's workers' compensation
insurer. Williams later settled with Kodiak Motors for $50,000.
Williams' attorneys' received this money but did not distribute
it to Williams, presumably pending resolution of the competing
claims of the attorneys and ARECA.
Williams proceeded to a full jury trial against Utility
Equipment. Williams first presented the testimony of James
Hamilton, the shop steward at KEA, who stated that Williams had
told him he had fallen off the truck the day of the accident.
Next Williams testified that on the day of the
accident, he and Darryl Walker were preparing to begin their
field work. Williams testified that he climbed onto the truck to
latch the truck boom which had not been properly secured. He
testified that he lost his balance and fell from the truck as he
was dismounting. No one saw Williams fall.
Darryl Walker testified that he heard a "thud" as he
entered the garage shortly after Williams. He testified as
Walker: I got to him as quick as I could
and asked him what -- if he was hurt. He
couldn't hardly breathe.
Williams' counsel: What happened next?
Walker: He said he'd fallen off . . . .
Utility Equipment's counsel: Excuse me.
I would object -- if Mr. Williams can
testify, but I think it's hearsay what this
witness has said, your honor.
. . . .
The court: The court will allow the
testimony at this time.
Williams' counsel: You may continue Mr.
Walker, tell us.
Walker: I asked him if he was all
right. He was trying to catch his wind.
"Les, are you all right?" "No, I hurt my
back." So I kind of got him up a little bit
so he could get his wind and then he kinda
got up. And he got in the pick-up truck.
Williams counsel: Just as [Utility
Equipment's counsel] made his objection you
were about to say he said something, what was
Subsequently, Williams' counsel was unable to get Walker to
explicitly state that Williams had told Walker that he had fallen
from the truck. On cross-examination, Walker testified
concerning the normal procedure for latching the boom. Utility
Equipment's counsel also questioned Walker concerning
inconsistencies between his deposition and trial testimony.
Williams' counsel later sought to enter into evidence
medical records recording Williams' statements that his injury
resulted from falling off a truck. The court refused to admit
these records on the grounds that these statements were
inadmissible hearsay and that they were cumulative of other
evidence already presented.
Before Utility Equipment presented its case, the trial
court clarified its protective order, stating that it would not
allow testimony concerning Williams' use of Dilaudid or other
illegally obtained pharmaceuticals. The court stated that it
would allow testimony regarding Williams' prescription drug use
as long as it was accompanied by a showing of relevance.
Utility Equipment presented the testimony of Dr.
Michael James, a physical rehabilitation specialist who started
treating Williams for pain in April 1988. Dr. James reviewed in
detail medical records dating back as far as 1983 indicating
Williams' history of prescription drug use. He also mentioned
that Williams had asked him for stronger medication and that
Williams had specifically suggested Dilaudid. Dr. James
testified that, in his opinion, Williams suffered from chronic
pain syndrome, which is characterized by a long history of
prescription drug use. Williams' counsel did not specifically
object to this testimony, nor did he ask the court to rule on its
relevance outside the presence of the jury.
In rebuttal, Williams presented the testimony of Dr.
Loren Halter, who had been treating Williams for a variety of
ailments since 1983. Dr. Halter testified in great detail
concerning Williams' use of prescription drugs.
The jury asked to rehear Walker's testimony before
reaching its verdict. The jury only answered one question on the
special verdict form. It found that Williams did not fall off of
the truck, and returned a verdict for Utility Equipment.
Williams made a motion for a new trial which the trial court
On July 26, 1990, Utility Equipment filed a motion
seeking to hold in abeyance the distribution of $50,000 held in
trust from the pretrial settlement agreement with Kodiak Motors.
Williams opposed this motion. On July 30, 1990, the court
ordered these funds to be held pending the court's decision
concerning the proper disbursement of these funds.2 On August 8,
1990, the trial court awarded Utility Equipment $65,500 in fees
and costs under Alaska Civil Rule 82. On October 15, 1990, the
trial court ruled that Utility Equipment's fees and costs were to
be paid first out of the funds held in trust. On November 13,
1990, the court clarified its order, stating:
[Utility Equipment] has first priority
[to the settlement funds] for its attorney's
fees and costs under AS 34.35.430(b).
[Williams] and employer follow and their
priority is determined by AS 23.30.015(g).
This appeal followed. ARECA filed an amicus brief. At
the time of this appeal, ARECA had paid Williams over $170,000 in
workers' compensation benefits.
A: Evidentiary Issues
This court will review the trial court's decision on
admissibility of evidence under the abuse of discretion standard.
Hawley v. State, 614 P.2d 1349, 1361 (Alaska 1980). The trial
court's decision to grant or deny a party's motion for a new
trial is likewise reviewed for an abuse of discretion. Exxon
Corp. v. Alvey, 690 P.2d 733, 741 (Alaska 1984).
(1) Walker's testimony
Williams argues that the trial court improperly
excluded Darryl Walker's testimony that he heard Williams say "I
fell off the truck"immediately following his accident. Our
review of the record does not support his contention. Walker was
interrupted by an objection from Utility Equipment's counsel.
The trial court overruled the hearsay objection, but Williams'
counsel was unable to elicit the desired response from Walker
because he was unable to frame his questions appropriately.
Furthermore, Walker's subsequent testimony indicates that
Williams told him that he had fallen "off the back." We conclude
that the trial court did not improperly "exclude"any of Walker's
(2) Medical records
Williams argues that the trial court improperly
excluded medical records substantiating his statement that he had
fallen off the truck. The court refused to admit these records,
holding that Williams' statements were inadmissible hearsay and
cumulative of evidence already presented. Specifically, the
court ruled that Williams' statements about falling off the truck
were not admissible under the medical diagnosis exception to the
hearsay rule because "whether it was a fall from the truck or
slipping on the ice, those are not relevant to the nature of the
diagnosis or treatment. . . ."
The evidence rule which governs is Rule 803(4) which
Statements made for purposes of medical
diagnosis or treatment and describing medical
history, or past or present symptoms, pain,
or sensations, or the inception or general
character or cause or external source thereof
insofar as reasonably pertinent to diagnosis
or treatment . . .
are not hearsay.
We believe that the trial court erred in its hearsay
analysis because Williams' statements to his physicians were made
for the purpose of diagnosis or treatment, were related to the
cause of his back injury, and were reasonably pertinent to its
diagnosis or treatment. In Johnson v. State, 579 P.2d 20 (Alaska
1978), we observed that
[s]tatements of a patient as to
presently existing body conditions are
generally admitted as evidence of the facts
stated because there is a high likelihood of
truthfulness resulting from the patient's
belief that the doctor will rely on such
statements in his diagnosis and treatment.
Where statements going to the cause of a
patient's condition relate information
desirable for diagnosis and treatment, they
are also admissible based on the same indicia
of reliability. . . . McCormick and the
commentary on the Federal Rules of Evidence
[distinguish] between general statements made
going to the cause of injury which are
important to diagnosis and treatment, and
statements entering the realm of fixing
fault. Since statements fixing fault and
indicating the identity of an assailant are
not relevant to medical diagnosis or
treatment, they lack assurances of
reliability and should be excluded.
Id. at 22 (footnotes omitted). Williams' description of his
accident does not directly fix fault or identify an assailant.
We also believe that it is relevant to the diagnosis of a back
injury whether a person fell from a height or slipped on the
ground. Therefore, under Johnson, Williams' statements were not
However, the court did not abuse its discretion in
excluding this evidence as cumulative under Alaska Rule of
Evidence 403. This rule provides that relevant evidence "may be
excluded if its probative value is outweighed . . . by
considerations of . . . needless presentation of cumulative
evidence." Alaska R. Evid. 403. Here, in addition to Walker's
testimony, both James Hamilton and Dr. James testified that
Williams told them that he had fallen off the truck. These
statements substantiate Williams' own testimony that he had
fallen off the truck. The jury certainly heard evidence that
Williams had repeatedly reported that he had fallen off the
truck. See Hiller v. Kawasaki Motors Corp., 671 P.2d 369, 372-73
(Alaska 1983) (exclusion of evidence not prejudicial where same
evidence presented to the jury in a different form).
We conclude that the trial court did not err in
excluding these medical records.
(3) Dr. James' testimony
concerning Williams' drug use
Williams argues that the trial court violated its own
protective order and erroneously admitted Dr. James' testimony
concerning Williams' use of Dilaudid and other prescription
drugs. During his testimony, Dr. James mentioned Williams' use
of Dilaudid. He also testified at length concerning Williams'
use of prescription drugs which he stated was indicative of
chronic pain syndrome. This testimony was not preceded by a
foundation of relevance in the absence of the jury, as the trial
court's order had suggested would be necessary.
Although Williams may have had grounds for objecting to
Dr. James' testimony, he did not make specific objections while
Dr. James was on the stand. In fact, after Dr. James finished
testifying, Williams' counsel presented the testimony of another
doctor who testified concerning Williams' drug use. We conclude
that Williams waived his objections, despite the protective
order, when he did not make specific objections as the testimony
was presented. Alaska State Housing Auth. v. Vincent, 396 P.2d
531, 534 (Alaska 1964) (a party may not raise objection to
evidence on appeal when evidence was admitted at trial without
B: Disbursement of Settlement Proceeds
At the close of trial, Williams' attorneys held
$54,094.79 from the pretrial settlements with Service
Manufacturing and Kodiak Motors. The trial court ruled that
Utility Equipment's right to satisfy its Rule 82 award from these
funds was superior to both Williams' attorneys' rights under AS
34.35.430(b) and Williams' employer's rights under AS
23.30.015(g).3 Because the proper disbursement of the settlement
proceeds depends on the interpretation of AS 34.35.430(b) and AS
23.30.015(g), a question of law is presented. In reviewing a
question of law, we will "adopt the rule of law that is most
persuasive in light of precedent, reason and policy." Guin v.
Ha, 591 P.2d 1281, 1284 n.6 (Alaska 1979).
(1) The employer's rights under AS 23.30.015(g)
Alaska Statute 23.30.015(g) requires an employee
receiving workers' compensation benefits to reimburse the
employer from any third party recovery "insofar as the recovery
is sufficient after deducting all litigation costs and expenses."4
We have previously observed that the underlying purpose of this
section is to prevent an injured employee from obtaining a double
recovery. Stafford v. Westchester Fire Ins. Co. of New York, 526
P.2d 37, 40 (Alaska 1974), overruled on other grounds by Cooper
v. Argonaut Ins. Co., 556 P.2d 525 (Alaska 1976). In Cooper, we
interpreted AS 23.30.015(g) to require the employer to pay a pro
rata share of the costs of recovery in order to prevent the
carrier from reaping a windfall at the employee's expense. 556
P.2d at 527.
The application of AS 23.30.015(g) to this case is
difficult because, although Williams recovered from Service
Manufacturing and Kodiak Motors, after his unsuccessful trial
against Utility Equipment, his total litigation costs exceeded
his total recovery. In its amicus brief, ARECA maintains that
the settlement recoveries are unconnected to Williams'
unsuccessful claim against Utility Equipment and concludes that
Utility Equipment has no special claims to payment from these
funds. We find ARECA's arguments unpersuasive. Essentially,
ARECA asks to share in the fruits of Williams' successful claims
while forcing Williams to shoulder the entire cost of his
unsuccessful claim against Utility Equipment. We believe that
this is contrary to our holding in Cooper. See Cooper, 556 P.2d
at 527. "All litigation costs"must be read broadly to include
the costs a plaintiff incurs in pursuing all the claims arising
out of his or her injury.
We hold therefore that AS 23.30.015(g) contemplates a
net gain from third party actions and allows employers to be
reimbursed from that gain. The practical effect of our holding
in this case will be to allow plaintiffs like Williams to control
funds recovered from third parties while there are still pending
claims against other defendants. Although a plaintiff may agree
to an earlier disbursement to the employer under AS 23.30.015(g)
(and therefore assume the risk that the cost of future litigation
may exceed recovery), he or she has the right to retain any funds
recovered until all third-party claims are resolved.
(2) Williams' attorneys' rights under AS 34.35.430
The trial court determined that Williams' attorneys'
right to the settlement funds under AS 34.35.430 was subordinate
to Utility Equipment's right to recover attorney's fees as a
prevailing party.5 Alaska R. Civ. P. 82. We disagree.
It is undisputed that Williams' attorneys had a lien on
the settlement proceeds still in their possession at the close of
trial. AS 34.35.430(a)(2); see In re Sea Catch, Inc., 36 B.R.
226, 230-31 (Bankr. D. Alaska 1983). Although AS 34.35.430(b)
provides that an attorney lien is "subordinate to the rights
existing between the parties,"we believe that this section is
properly interpreted to apply only to the parties actually
involved in each settlement. Utility Equipment was not a party
to either pretrial settlement, and therefore is not entitled to
priority under AS 34.35.430(b). See Phillips v. Jones, 355 P.2d
166, 172 (Alaska 1960) (attorney lien statute should be liberally
construed to effect its statutory goal of furnishing security to
attorneys for their efforts). To hold otherwise would deter
settlements in cases involving multiple defendants. We therefore
reverse the trial court on this issue and remand this case to the
trial court for a disbursement order consistent with this
AFFIRMED in part, REVERSED in part and REMANDED.
1. Apparently the court granted Williams request for a
protective order, but this order is not included in the record.
2. Williams' attorneys also held in trust $4,094.79, the
undistributed portion of the settlement with Service
Manufacturing, for a total of $54,094.79.
3. Williams argues that the trial court's order holding the
settlement funds in abeyance does not conform to Alaska Civil
Rule 65. We agree that the trial court's order does not conform
to the rules governing either temporary restraining orders or
attachment. See Alaska R. Civ. P. 65; Alaska R. Civ. P. 88.
However, we do not address this issue, since our holding on the
merits is dispositive.
4. AS 23.30.015(g) provides:
If the employee or the employee's
representative recovers damages from the
third person, the employee or representative
shall promptly pay to the employer the total
amounts paid by the employer under (e)(1)(A),
(B), and (C) of this section, insofar as the
recovery is sufficient after deducting all
litigation costs and expenses. Any excess
recovery by the employee or representative
shall be credited against any amount payable
by the employer thereafter.
5. AS 34.35.430 provides:
(a) An attorney has a lien for
compensation, whether specially agreed upon
or implied, as provided in this section
(1) first, upon the
papers of the client that have come
into the possession of the attorney
in the course of the professional
(2) second, upon money in
the possession of the attorney
belonging to the client;
(3) third, upon money in
the possession of the adverse party
in an action or proceeding in which
the attorney is employed, from the
giving of notice of the lien to
(4) fourth, upon a
judgment to the extent of the costs
included in the judgment or, if
there is a special agreement, to
the extent of the compensation
specially agreed on, from the
giving of notice of the lien to the
party against whom the judgment is
given and filing the original with
the clerk where the judgment is
entered and docketed.
(b) This lien is, however, subordinate
to the rights existing between the parties to
the action or proceeding.