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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. Shehata v. Salvation Army (3/12/2010) sp-6460
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
| VICTOR SHEHATA, | ) |
| ) Supreme Court No. S- 12940 | |
| Appellant, | ) |
| ) Alaska Workers Compensation | |
| v. | ) Appeals Commission No. 07-021 |
| ) | |
| SALVATION ARMY and | ) O P I N I O N |
| NORTHERN ADJUSTERS, | ) |
| ) No. 6460 - March 12, 2010 | |
| Appellees. | ) |
| ) | |
Appeal from the Alaska
Workers Compensation Appeals Commission,
Kristin S. Knudsen, Chair.
Appearances: Phillip J. Eide and Laura S.
Gould, Eide & Gingras, P.C., Anchorage, for
Appellant. Colby J. Smith and Krista M.
Schwarting, Griffin & Smith, Anchorage, for
Appellees.
Before: Fabe, Chief Justice, Eastaugh,
Carpeneti, and Winfree, Justices. [Matthews,
Justice, not participating.]
CARPENETI, Justice.
I. INTRODUCTION
This appeal concerns reimbursement for fraudulent
receipt of workers compensation benefits. An employee worked
part-time for five weeks while he was receiving workers
compensation benefits for a shoulder injury but did not inform
his former employer that he was working. On his last day at the
part-time job, the employee untruthfully told the workers
compensation claims adjuster that he was not working. The Alaska
Workers Compensation Board ordered the employee to reimburse his
employer for workers compensation benefits he received during the
entire time he was working, finding that he obtained benefits
fraudulently by telling the adjuster that he was not working.
The board assessed over $14,000 in attorneys fees against him as
well. The Alaska Workers Compensation Appeals Commission
affirmed the board rulings. In a separate decision, the
commission ordered the employee to pay an additional $5,270 in
attorneys fees to the employer, finding that his appeal was
frivolous or unreasonable. We conclude that the workers
compensation fraud statute requires a causal link between a false
statement and the benefits obtained; here, cause is lacking for
any benefits paid before the false statement . We therefore
reverse the order for reimbursement of benefits paid before the
date of the statement. We affirm the order requiring repayment
of one week of benefits. Finally, we conclude that the employees
appeal was not frivolous and reverse the commissions decision
awarding attorneys fees for the appeal.
II. FACTS AND PROCEEDINGS
Victor Shehata injured his shoulder at his job for the
Salvation Army in December 2003. The Salvation Army accepted the
compensability of the injury and initially paid medical benefits.
Shehata had shoulder surgery in July 2005. He received temporary
total disability (TTD) benefits from February 1, 2005 through
April 7, 2006.1 He also got a lump sum permanent partial
impairment (PPI) payment in April 2006.
In September 2005 Shehata began to work part-time at
Totem Equipment & Supply, Inc. doing clerical work. According to
Shehata, he decided to try to work at Totem after the owner, who
was a friend of his, asked for his help. Shehata earned about
$280 a week from Totem; he also received $411.95 a week in TTD
benefits from the Salvation Army. He did not inform the
Salvation Army or the insurance adjuster that he was working part-
time.
In early October 2005, the Salvation Army hired an
investigator to follow Shehata. According to the insurance
adjuster, she hired the investigator because the Salvation Army
was considering an offer of light duty work to Shehata and she
wanted information about his physical capacity as she had noticed
references to refereeing soccer in Shehatas medical records. The
investigation indicated that Shehata was working at Totem. The
adjuster testified that she knew by October 14, 2005, that
Shehata was working part-time. That day, the adjuster taped
part of a telephone conversation she had with Shehata. In the
call, she said, as I understand it, youre not actually working?
Shehata answered, No. At the time he was talking to the
adjuster, Shehata was standing outside Totems office, being
videotaped by the investigator. Shehatas last day of work with
Totem was October 14, 2005. On October 17, 2005, the adjuster
again talked to Shehata on the phone and recorded the call.
Their conversation contained the following exchange:
[Adjuster]: . . . we just have to know
whether youre earning wages, whether youre
earning . . .
[Shehata]: Oh, no, no, no, no. I dont
earn no wages, I dont get no unemployment. I
dont get no Social Security [] Disability, I
think thats what youre saying, or otherwise.
Earlier in the conversation, Shehata affirmed that he had told
her in the previous conversation that he was not working, but was
looking for work.
The Salvation Army confirmed Shehatas employment with
Totem in mid-November. It filed a notice of controversion on
November 30, 2005, controverting Shehatas receipt of TTD benefits
from September 12, 2005 through October 15, 2005. It continued
to pay Shehata TTD benefits until April 6, 2006, without
withholding the TTD benefits it had controverted in November.
The Salvation Army sent Shehata written discovery
requests related to his employment on December 13, 2005. Two
days later it sent a notice that it planned to take Shehatas
deposition on January 6, 2006. Shehata and his attorney appeared
at the scheduled deposition. At the deposition, the Salvation
Armys attorney indicated that Shehatas attorney had told him that
Shehata would not contest the controversion. Shehatas attorney
confirmed this and said that Shehata was prepared to submit
information with respect to what his earnings were during the
time of controversion. He also stated that Shehatas work may
result in no TTD benefits, it might result in [temporary partial
disability] benefits, but its not going to be a claim on our
part. Shehatas attorney said that Shehata would prefer not to go
through the questioning of a deposition because of health
concerns,2 that he would give written responses to the Salvation
Army and then hopefully resolve this claim down the road. The
Salvation Army noted for the record that Shehata was also
unwilling to participate in the deposition because he had not
filed a claim; it then cancelled the deposition. Shehata
answered the Salvation Armys written discovery requests on
January 10, 2006. He described his work at Totem and supplied
copies of his check stubs from Totem.
On April 7, 2006, a physician evaluated Shehata on
behalf of the Salvation Army. The physician reported that in his
opinion Shehata had reached medical stability and had a nine
percent whole person permanent partial impairment (PPI) rating.
Based on this report, the Salvation Army controverted Shehatas
eligibility for continuing TTD benefits, and on April 24, 2006,
it paid Shehata $15,930 as a lump sum PPI benefit, again without
withholding the TTD benefits it had paid while Shehata was
working at Totem.3
On June 27, 2006, the Salvation Army filed a petition
to compel Shehata to attend a deposition.4 On July 24, 2006, the
Salvation Army filed a petition for reimbursement under AS
23.30.250(b), which authorizes the board to order repayment of
fraudulently obtained workers compensation benefits. In its
petition, the Salvation Army asked for full reimbursement for
temporary total disability benefits paid from September 21, 2005
through October 15, 2005 and all reasonable costs and attorneys
fees incurred in obtaining these benefits. It also noted
difficulties in obtaining discovery and stated that its claim for
reimbursement might be amended after the appropriate discovery
occurs.5 On the same day, it filed a separate petition
requesting that the board compel Shehata to sign tax and
employment releases.
Shehata answered the petition for reimbursement by
admitting that he had worked part-time from September 12, 2005
through October 15, 2005. He also answered that the Salvation
Army had been advised as early as January 2006 that he would not
contest controversion of TTD benefits for that period, so that
the Salvation Army was entitled to adjust Mr. Shehatas benefits
to Temporary Partial Disability benefits for the relevant time
period. Shehata declared that the petition for reimbursement was
unnecessary because the Salvation Army could recover any
overpayment through an offset of future compensation. He asked
that the board deny the petition. Shehata also answered the
petition to compel him to attend a deposition, noting that
because he had not contested the controversion of TTD benefits or
filed a written claim, he disputed whether he could be made to
testify at a deposition. He additionally opposed the employers
request that he sign tax and employment releases because he had
already produced wage information for the period of time relevant
to the employers petition.
Shehatas attorney did not appear at the prehearing
conference related to the discovery petitions.6 The prehearing
conference officer granted the employers requests for discovery.
Shehatas deposition was held on September 27, 2006. At the
deposition, Shehata admitted that he made a misrepresentation to
the adjuster when he talked to her on October 14, 2005.
The board held a hearing on the Salvation Armys
petition for reimbursement on November 15, 2006. Shehata and the
insurance adjuster testified. Shehata testified about his work at
Totem and his statements to the adjuster. He testified that he
was unaware that he was committing fraud when he told the
adjuster in October 2005 he was not working; he said that he was
trying to see if he could go back to work and that he did not
think about workers compensation when he went back to work.
The adjuster testified about the conversations she
recorded in October 2005 and explained why she hired an
investigator to follow Shehata. She also discussed the reasons
she did not immediately file a notice of controversion and did
not simply withhold benefits after the November 2005
controversion was filed. According to the adjuster, when she
filed a controversion based on surveillance in another case, it
had not turned out well, so she wanted more confirming
information before she filed. She also testified that she did
not withhold benefits because there was never a firm agreement
about how much had been overpaid. She acknowledged that part of
her job is to help explain benefits to employees, but said that
she did not tell Shehata that he could work part-time and
possibly get benefits because he did not admit working.
In its April 2007 decision the board granted the
employers petition. In its decision, the board construed AS
23.30.250(b) to authorize forfeiture and reimbursement of only
those benefits resulting from intentional false or misleading
statements or representations. In making findings, the board
decided first that Shehata was not eligible for TTD benefits
effective September 12, 2005, when he began to work part-time for
Totem, because he was able to return to work. It determined that
Shehata had misrepresented his ability to work on October 14,
2005, and October 17, 2005, when he spoke with the adjuster. It
further found that Shehata systematically attempted to mislead
the employer concerning his ability to work from September 12,
2005 to October 15, 2005. It also ordered Shehata to pay
$14,567.05 for attorneys fees and costs in obtaining this order.
Shehata appealed to the appeals commission. Before the
commission, he argued that (1) the board order was incorrect as a
matter of law; (2) the Salvation Army had waived its right to
recover the money; and (3) the attorneys fees award was
unreasonable because the employer had engaged in unnecessary
litigation. In his appeals commission brief, Shehata set out the
elements of the tort of misrepresentation and argued that the
Salvation Army had not met its burden of proving all of the
elements of misrepresentation. He also argued that the Salvation
Army had not shown that he had received any benefits as a result
of the misrepresentation because the adjuster knew that Shehata
was lying when she recorded him on October 14, before she
authorized his TTD check for the week of October 10, 2005.
Shehata asserted that the Salvation Army implicitly waived its
right to request reimbursement by continuing to pay him TTD and
PPI benefits after he told it that he would not contest its
controversion of benefits. Alternatively, he argued that a
reimbursement order under subsection .250(b) was inappropriate
because the Salvation Army had not proven all of the elements of
fraud; without a determination of fraud, the only possible
recovery of an overpayment was using the offset provision of AS
23.30.155(j).7 Finally, he argued that the attorneys fees
awarded by the board were not necessary because he had told the
Salvation Army in January 2006 that he would not be contesting
the November 2005 controversion of TTD benefits. It thus could
have recovered the overpayment through an offset without
incurring significant attorneys fees.
The appeals commission affirmed the board. The
commission decision set out the elements of fraud under
subsection .250(b) that this court adopted in Municipality of
Anchorage v. Devon8 and decided that substantial evidence in the
record supported the boards decision that Shehata had committed
fraud. In discussing Shehatas argument that reliance was
necessary to show fraud under subsection .250(b), the commission
construed representation in the statute to include silence: it
stated, [A]n employees knowing misrepresentation through silence
in the face of an affirmative obligation to disclose information
that would affect a right to compensation may result in obtaining
benefits because the employer is obligated to continue payment in
the absence of evidence. The commission decided that Shehatas
false statements and concealment of his work status, when he had
an affirmative duty to disclose it could support a finding that
Shehata received benefits as a result of his misrepresentation.
The commission interpreted Shehatas waiver argument as
an argument that an employer must use the offset provision to
recover benefits and rejected it, finding that the employer was
entitled to use the fraud section of the statute to recoup
benefits when the overpayment is the result of the employees
false statements or misrepresentations. It went on to hold that
substantial evidence in the record supported the boards findings.
It stated:
[W]e find that the evidence relied on by the
board was sufficient to allow a reasonable
mind to conclude that Shehata knowingly
concealed his job at Totem, knowingly lied to
Wentworth about his ability to work and
earnings, and that he did so in order to
delay, if not prevent, the discovery of his
ability to work and to continue to receive
compensation or avoid having to repay the
compensation he received while employed.
It also upheld the boards award of attorneys fees as reasonable,
noting that some . . .of the fees claimed were attributable to
Shehatas hindrance of Salvation Armys investigation and
opposition to the petition for a reimbursement order.
After the commission affirmed the board decision, the
Salvation Army asked the commission to award it attorneys fees
and costs incurred in the appeal. The commission awarded fees of
$5,270 in a divided decision. Two commissioners decided that an
award of fees was appropriate either because the appeal was
frivolous or because Shehata was not an injured worker. The
commission chair dissented and would not have awarded fees for
the appeal.
Shehata appeals both commission decisions.
III. STANDARD OF REVIEW
In workers compensation appeals from the appeals
commission, we review the commissions decision and apply our
independent judgment when there is a question of law that does
not involve agency expertise.9 We independently review factual
findings made by the board to see whether they are supported by
substantial evidence in light of the whole record.10 Substantial
evidence is such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion. 11 We review awards of
attorneys fees for an abuse of discretion.12 An abuse of
discretion exists if the award is arbitrary, capricious,
manifestly unreasonable, or improperly motivated. 13
IV. DISCUSSION
A. A Causal Relationship Must Exist Between the False
Statement and Obtaining Benefits.
In this appeal, Shehata reiterates his argument that
the Salvation Army must show justifiable reliance on his false
statement before he can be made to repay benefits pursuant to AS
23.30.250(b). He relies on Seybert v. Cominco Alaska Exploration14
to support his contention that justifiable reliance is an element
of misrepresentation in workers compensation cases. He asserts
that the Salvation Army cannot have justifiably relied on his
false statement because it knew that the statement was false when
he made it. Shehata also argues that the statute and case law
require a causal connection between his statement and the TTD
benefits, yet the Salvation Army never showed that he obtained
benefits as a result of the misrepresentation. The Salvation
Army asks us to uphold the commissions decision, contending that
the commission applied the correct legal standard. The Salvation
Army argues that Shehata is trying to add a non-existent element
to a fraud claim under subsection .250(b).
Alaska Statute 23.30.250(b) permits the board to order
reimbursement of fraudulently obtained workers compensation
benefits in some circumstances. At the time of Shehatas injury,
subsection .250(b) provided:
If the board, after a hearing, finds that a
person has obtained compensation, medical
treatment, or another benefit provided under
this chapter, by knowingly making a false or
misleading statement or representation for
the purpose of obtaining that benefit, the
board shall order that person to make full
reimbursement of the cost of all benefits
obtained. Upon entry of an order authorized
under this subsection, the board shall also
order that person to pay all reasonable costs
and attorney fees incurred by the employer
and the employers carrier in obtaining an
order under this section and in defending any
claim made for benefits under this chapter.
If a person fails to comply with an order of
the board requiring reimbursement of
compensation and payment of costs and
attorney fees, the employer may declare the
person in default and proceed to collect any
sum due as provided under AS 23.30.170(b) and
(c).[15]
In Municipality of Anchorage v. Devon, we adopted the
boards test for fraud claims under AS 23.30.250(b).16 As set out
in Devon, for an employer to prevail on a fraud claim under
subsection .250(b), [t]he employer must show that (1) the
employee made statements or representations; (2) the statements
were false or misleading; (3) the statements were made knowingly;
and (4) the statements resulted in the employee obtaining
benefits.17 The standard of proof in subsection .250(b) cases is
by a preponderance of the evidence.18
The commission rejected Shehatas argument that an
employer must prove all of the elements of common law fraud in
order to secure a reimbursement order under subsection .250(b).
It stated that the statutory remedy provided in AS 23.30.250(b)
is, in and of itself, complete, and requires neither a showing of
damages nor justifiable reliance. It distinguished common law
fraud from fraud in workers compensation by noting that an
employers payment of compensation to an injured worker is imposed
by statute, so that an employer has a legal obligation to pay
unless it has adequate evidence on which to base a controversion.
The commission concluded that payment of compensation is not
induced by a false statement in the same way that a contract or
sale may be induced in a fraudulent misrepresentation claim.
Common law fraud claims require a showing of (1) a
false representation of fact; (2) knowledge of the falsity of the
representation; (3) intention to induce reliance; (4) justifiable
reliance; and (5) damages.19 Shehata argues that an employer must
prove all of the elements of common law fraud in order for the
board to order reimbursement under subsection .250(b), but
justifiable reliance is the element that is key to his case. As
a general rule, in common law fraud, a person cannot justifiably
rely on a statement she knows to be false.20 Because the adjuster
testified here that she knew Shehata was working when he said
that he was not, Shehata concludes that the Salvation Army cannot
show justifiable reliance and is not entitled to a reimbursement
order for fraud under subsection .250(b).
We begin with the statutory language to determine
whether an employer must prove all of the elements of common law
fraud in order to secure a reimbursement order under subsection
.250(b). The goal of statutory construction is to give effect to
the legislatures intent, with due regard for the meaning the
statutory language conveys to others.21 When construing a
statute, we look at three factors: the language of the statute,
the legislative history, and the legislative purpose behind the
statute.22 Nothing in the language of the statute or the
legislative history indicates that the legislature intended to
require an employer to prove all of the elements of common law
fraud or misrepresentation in order to secure reimbursement under
subsection .250(b). The purpose identified by the sponsor for
subsection .250(b) was to permit employers to get reimbursement
orders for fraud from the board rather than from the court.23
Although there may be some similarities between common law fraud
and fraud for purposes of subsection .250(b), we decline to read
into the statute a legislative intent to incorporate all of the
elements of common law fraud. Courts of two other states that
have considered similar arguments have rejected them, holding
that workers compensation fraud statutes do not incorporate all
of the elements of common law fraud.24
But even if AS 23.30.250(b) does not require proof of
all of the elements of common law fraud, we hold that it does
require a causal link between a false statement or representation
and benefits obtained by the employee. Subsection .250(b) states
that the board shall order reimbursement when it finds that a
person has obtained compensation . . . by knowingly making a
false or misleading statement or representation for the purpose
of obtaining that benefit. The plain language of the statute
requires causation. As a transitive verb, obtain means to gain
possession of, esp[ecially] by intention or endeavor.25 By has
many meanings, but the relevant definition here appears to be
through the agency or action of.26 The phrase obtain by strongly
suggests causation.27 Read as a whole, the statute requires that
the false statement or representation be a causal factor in the
employers payment of workers compensation benefits.28
Here, the board ordered Shehata to reimburse the
Salvation Army for TTD received from September 12, 2005 to
October 14, 2005 for fraudulently obtaining these benefits with
false or misleading statements. Because logically a cause must
come before a result,29 Shehatas false statement on October 14,
2005 cannot have been a causal factor in the Salvation Armys
payment of benefits before he made the statement. The board
decision is potentially ambiguous in this regard. It found that
Shehata systematically attempted to mislead the employer
concerning his ability to work from September 12, 2005 to October
15, 2005. The phrase from September 12, 2005 to October 15, 2005
could modify attempted to mislead or work. At oral argument
before us, the Salvation Army clarified that Shehata made no
false statements related to his employment at Totem before
October 14, 2005, so the only false statements were made on or
after October 14. Absent some other false statement or
representation, the board erred in concluding that Shehata had
obtained TTD benefits before October 14, 2005, fraudulently by
means of false or misleading statements.
B. Shehatas Silence Was Not a Representation for Purposes
of AS 23.30.250(b).
Although the boards order focused on Shehatas October
14 and 17 statements to the adjuster, the appeals commission
decided that silence could be a knowing misrepresentation under
subsection .250(b). It determined that an employee has an
affirmative obligation to disclose information that would affect
a right to compensation and that Shehatas failure to disclose his
work status could result in the continuing payment of
compensation and thus could have resulted in his obtaining
benefits.30 The commission cited no statutory language,
legislative history, or board regulation to support its
conclusion either that an employee has an affirmative duty to
disclose information that would affect a right to compensation or
that failure to disclose such information can serve as a basis
for a reimbursement order under subsection .250(b).
We requested supplemental briefing from the parties
about whether an employee has an affirmative duty to disclose his
work status when he is receiving compensation benefits and
whether any such duty could serve as the basis of a fraud claim
under subsection .250(b). Shehata argued, based on the language
of the statute, that there is no affirmative duty to disclose
ones work status, and that even if there is a duty, his failure
to disclose his work could not be the basis for a fraud claim.
The Salvation Army conceded that there is no explicit statutory
duty to disclose employment while receiving workers compensation
benefits, but nonetheless insisted that such a duty is implicit
in the workers compensation statute. It asserted that because
the employer is required to pay compensation in the absence of
information showing that a claimant is no longer entitled to it
and because the claimant is in the best position to know whether
he is working, it is fair to impose a duty to disclose work on a
claimant. At oral argument before us, the Salvation Army
justified the boards order for reimbursement of benefits received
before October 14 on the grounds that an employee has an
obligation to contemporaneously inform the adjuster of employment
if he is receiving TTD benefits.31
The plain language of the statute does not authorize
the board to order reimbursement based on silence, nondisclosure,
or omissions: it requires a finding that a person made a false or
misleading statement or representation.32 The first element of
the test in Devon is that the employee made statements or
representations.33 The Salvation Army conceded at oral argument
before us that Shehata made no affirmative false statement or
representation before October 14, but urged us to uphold the
commissions decision because Shehata did not contemporaneously
inform the adjuster he was working. The legislatures failure to
include omissions or nondisclosure in the statutory language
suggests that ordinarily an omission or nondisclosure could not
serve as a basis for a reimbursement order under subsection
.250(b).34 Nonetheless, we recognize that in the common law,
silence can be a misrepresentation when a person has a duty to
speak.35 We have also held that silence in the face of a
statutory duty to disclose can amount[] to the concealment of a
material fact for purposes of estoppel.36 Accordingly, we
consider whether Shehata had a duty to disclose his employment at
Totem to the Salvation Army.
The parties agreed that no statute or regulation
explicitly imposes on an employee the duty to inform the
employer, the adjuster, or the board that he is working. The
commission cited none. Neither the commission nor the Salvation
Army pointed to anything in the record imposing such a duty.
Nevertheless, at oral argument before us, the Salvation Army
advocated finding an implicit, narrow duty to disclose employment
when an employee is receiving TTD benefits. In the absence of a
statute or regulation requiring an employee to tell the board,
the adjuster, or his employer that he is working, we are
reluctant to find a specific affirmative duty to disclose
employment, even when an employee is receiving TTD benefits. We
are especially hesitant to do so in light of the commissions
broad statement that an employee has an affirmative obligation to
disclose information that would affect a right to compensation
and its conclusion that a failure to disclose that information
can serve as the basis for a fraud claim. As both parties
recognized at oral argument before us, a broad duty to disclose
that could result in fraud claims against employees might cause
unnecessary disruption of benefits or chill employee claims. If
an employee has a duty to disclose any information that would
affect a right to compensation immediately, would an employee who
waited a month, until his next scheduled medical appointment, to
discuss an improvement in symptoms be liable for fraud because he
did not immediately disclose the information? We agree with the
Salvation Army that the employee is in the best position to know
when he has begun to work and that employees should not be
getting both TTD and working.37 Nonetheless, we can find no
indication that the legislature or the board intended to impose
on an employee an affirmative duty to tell the employer, the
board, or the adjuster that he has begun to work, such that a
failure to disclose his work status would be a false
representation for purposes of subsection .250(b). There is also
nothing in the record to show that anyone told Shehata that he
was required to report his employment within a certain period of
time or that he might be subject to a fraud claim if he did not
report it. Here, Shehata told the adjuster in the October 14
conversation that he was looking for work, yet the adjuster did
not tell him that he needed to tell her immediately if he was
hired, nor did she tell him that he might be able to get
temporary partial disability payments while working.
For these reasons, we conclude that Shehatas
nondisclosure of his work at Totem was not a false statement or
representation under subsection .250(b) and that he cannot be
ordered to reimburse the Salvation Army for benefits he obtained
because of the nondisclosure.
C. Substantial Evidence
The remaining question is whether substantial evidence
in the record supports the boards order for reimbursement.
Shehata argues that substantial evidence does not support a
finding of fraud because there was no showing that the Salvation
Army reasonably or justifiably relied on Shehatas
misrepresentation when it paid him TTD benefits.38 He also argues
that the Salvation Army had adequate evidence to support a
controversion before it paid him benefits on October 24, so the
commissions conclusion to the contrary is incorrect.
Shehata cannot have obtained benefits by making his
false statement before he made the statement, so Shehata can only
be required to reimburse the Salvation Army for benefits he
received after he made the false statement. Although the boards
order for reimbursement of all benefits paid for the period from
September 12 to October 15, 2005, was too broad, Shehata may
still be ordered to reimburse the Salvation Army for benefits it
paid him after the false statement. The record reflects that the
Salvation Army paid Shehata TTD benefits on October 24, 2005, for
the period from October 10 to October 23.39
In order for the Salvation Army to get reimbursement,
it had to show a causal link between the false statement and the
payment of benefits. Here, it does not appear that Shehatas
false statement alone caused the adjuster to pay benefits: she
testified that she knew he was working when he told her he was
not, so it is unlikely that she was actually deceived by his
statement. Her stated reason for paying Shehata TTD benefits on
October 24 was that she did not have adequate confirming evidence
that he was working to be able to file a valid controversion.
In determining whether the false statement was a causal
factor in the payment of benefits, we consider whether the false
statement influenced the adjuster in paying benefits after the
statement was made, taking into account whether she was actually
deceived and, if she was not, whether she acted reasonably to
investigate the false statement. Although there is no evidence
that the adjuster was deceived by the false statement, we agree
that she did not have sufficient evidence to file a good faith
controversion when the statement was made. Our review of the
video tape supports the adjusters testimony that the video alone
was insufficient evidence to support a good faith controversion.
A file stamp on the investigators report shows that the adjuster
received it a week after the October 24 payment was authorized.
Although the adjuster could have gotten written confirmation from
Totem sooner than she did, we cannot say that her delay in
investigating was unreasonable. We do not suggest that an
employer has a duty to investigate all statements made by an
injured worker. If an employer seeks claim-related information
from the person most likely to have the information here, the
injured worker the employer should be able to rely on the
workers representation without needing to hire an investigator or
expend resources to verify the workers statement. Unnecessary
investigative expenses increase the cost of claims and undercut
the legislatures intent that the workers compensation statute be
construed to ensure the quick, efficient, fair and predictable
delivery of indemnity to injured workers at a reasonable cost to
employers.40 It is also important to avoid overly hasty
controversions, which can expose an employer to the risk of a
penalty41 and can disrupt benefits to injured workers.42 But when,
as here, the employer is reasonably certain that the employee is
not being truthful, the employer has an obligation to protect its
interests and, if it does not have adequate evidence to support a
controversion, it should act reasonably to secure it.43
D. Shehatas Waiver Argument
Shehata asserts here that the commission erred in
concluding that the Salvation Army could seek reimbursement of
the controverted TTD benefits using subsection .250(b)44 in the
absence of fraud. He further asserts that the Salvation Army
waived its right to seek reimbursement under AS 23.30.155(j),
which permits recoupment of overpaid benefits through
withholding, by failing to adjust his TTD payments after he told
it that he would not contest the controversion.
Shehata misunderstands the commissions resolution of
this issue. Because it affirmed the boards order under
subsection .250(b), the commission declined to address the waiver
issue Shehata raised. Because of its affirmance of the boards
order, it effectively found that Shehata had obtained benefits
fraudulently, so his waiver argument was moot. From the record,
it does not appear that Shehata is currently receiving workers
compensation benefits, so the issue of waiver is not ripe. If,
at a later time, Shehata is awarded other benefits and the
Salvation Army attempts to take an offset for the benefits at
issue in this appeal, Shehata can raise the argument again.
E. The Appeal Was Not Frivolous.
In a divided decision, the commission ordered Shehata
to pay the Salvation Army $5,270 in attorneys fees for the appeal
to the commission. One commissioner decided that Shehatas appeal
was frivolous or unreasonable. Another commissioner found that
Shehata was not an injured worker within the meaning of the
statute, so that the statutory provision limiting attorneys fees
awards against injured workers would not apply. The commission
chair dissented from the award of attorneys fees, concluding that
Shehatas appeal was not frivolous or unreasonable and that
Shehata was still an injured worker for purposes of the attorneys
fee statute.
Shehata argues here that the commissions decision is
contrary to both the law and the facts. The Salvation Army
asserts that the commission relied on subsection .250(b) in
awarding fees and that an award of fees is mandatory under that
subsection. It concedes that Shehata was an injured worker
because he had a compensable injury, but contends that Shehatas
arguments were without basis in fact or law and asks us to affirm
the commissions award of fees in the appeal.
Alaska Statute 23.30.008(d) authorizes the appeals
commission to award attorneys fees and costs to a successful
party in an appeal. It also provides that the commission may not
make an award of attorney fees against an injured worker unless
the commission finds that the workers position on appeal was
frivolous or unreasonable or the appeal was taken in bad faith.45
We review an award of attorneys fees for abuse of discretion.46
We conclude that the commission abused its discretion
in awarding attorneys fees to the Salvation Army for the
commission appeal here. Neither commissioner who granted the
Salvation Armys fee request found that Shehata had brought the
appeal in bad faith, and there is no evidence of bad faith on his
part. Shehata was an injured worker, as the Salvation Army
concedes. No one contests that he suffered a compensable injury.
Even after the false statement, the Salvation Army paid him PPI
benefits, and the adjuster testified that the employer never
contested that he was entitled to the benefits.
Shehatas appeal was also not frivolous or unreasonable.
Even if he had been unsuccessful in his appeal to this court, the
main legal issue he raised had a basis in law and fact. Both AS
23.30.250(b) and the elements in Devon require causation,47 and
justifiable reliance is the cause-in-fact element of
misrepresentation. Factually, the adjusters testimony that she
knew Shehata was working when he stated he was not undercut the
notion that the false statement had any causal effect on the
payment of benefits.
At oral argument before us, the Salvation Army asserted
that the commissions fee award was also justified because of
Shehatas opposition to discovery at the board level or was
authorized by AS 23.30.250(b). One commissioner relied in part
on Shehatas opposition to discovery before the board in his
explanation supporting the fee award. But a partys conduct
before the board does not bear on the frivolousness of an appeal
to the commission.48 Alaska Statute 23.30.250(b) does not
authorize the commission to award fees. We agree with the
commission chair that the legislature must act if it wishes to
grant the commission the power to award fees under subsection
.250(b).
V. CONCLUSION
Because AS 23.30.250(b) requires a causal connection
between the false statement and the workers compensation benefits
obtained and because the employee did not have a duty to disclose
his work status, we REVERSE in part the appeals commission
decision affirming the boards reimbursement order. We AFFIRM
that part of the decision requiring Shehata to repay one week of
benefits. We also REVERSE the commission decision awarding
attorneys fees for the appeal.
_______________________________
1 Shehata left his job at the Salvation Army and got
unemployment benefits before he started getting TTD benefits.
There was a three to four month gap between the time Shehata
stopped getting unemployment benefits and started getting TTD
benefits.
2 Shehata had heart surgery in 2005.
3 Based on his compensation rate, Shehata received
$2,059.75 in TTD benefits during the time he worked at Totem.
4 The Salvation Army had not yet noticed another
deposition but was asking for an order compelling one because
Shehata took the position that he should not be subject to a
deposition because no claim had been filed. Board decisions hold
that an employer cannot take an employees discovery deposition
unless a claim or controversion has been filed. See Arline v.
Evergreen Intl Aviation, AWCB Decision No. 98-0221 at 8-11
(August 24, 1998); Cates v. Real Estate Servs., AWCB Decision No.
03-0145 (June 24, 2003) (reaffirming Arline).
5 The Salvation Army later filed a second petition asking
for reimbursement for a different period of time. The second
petition is not part of this appeal.
6 The attorney told the board at a later hearing that he
missed the prehearing conference because he went out of town
prematurely because of a birth in his family and the prehearing
fell between the cracks at his office.
7 AS 23.30.155(j) permits an employer to withhold up to
twenty percent of unpaid installments of compensation when it has
overpaid compensation; withholding of more than twenty percent is
permitted with board approval.
8 124 P.3d 424, 429 (Alaska 2005). Although the board
mentioned Devon in its decision, it did not make findings about
each element set out in Devon.
9 Barrington v. Alaska Commcns Sys. Group, Inc., 198 P.3d
1122, 1125 (Alaska 2008).
10 Smith v. CSK Auto, Inc., 204 P.3d 1001, 1007 (Alaska
2009).
11 Circle De Lumber Co. v. Humphrey, 130 P.3d 941, 946
(Alaska 2006) (quoting Robertson v. Am. Mech., Inc., 54 P.3d 777,
779 (Alaska 2002)).
12 Crawford & Co. v. Vienna, 744 P.2d 1175, 1178 n.3
(Alaska 1987). See also Alaska Wildlife Alliance v. State, 74
P.3d 201, 205 (Alaska 2003) (applying abuse of discretion
standard to Rule 82 attorneys fees award).
13 Rhodes v. Erion, 189 P.3d 1051, 1053 (Alaska 2008)
(quoting Kellis v. Crites, 20 P.3d 1112, 1113 (Alaska 2001)).
14 182 P.3d 1079 (Alaska 2008).
15 Former AS 23.30.250(b). The 2005 amendments to the
workers compensation statute made a slight revision to subsection
.250(b) that is irrelevant to this appeal. See ch. 10, 61,
FSSLA 2005.
16 124 P.3d 424, 429 (Alaska 2005).
17 Id. (citing Church v. Silver Bay Logging, Inc., AWCB
Decision No. 99-0139 (June 24, 1999)).
18 DeNuptiis v. Unocal Corp., 63 P.3d 272, 278 (Alaska
2003).
19 Jarvis v. Ensminger, 134 P.3d 353, 363 (Alaska 2006)
(citing City of Fairbanks v. Amoco Chem. Co., 952 P.2d 1173, 1176
n.4 (Alaska 1998)). Shehatas reliance on Seybert is misplaced.
Seybert dealt with setting aside a settlement agreement because
of an alleged material misrepresentation that induced the
employee to enter into the agreement. Seybert, 182 P.3d at 1093.
We had previously decided that the board had the inherent
authority to set aside a settlement agreement because of fraud.
See Williams v. Abood, 53 P.3d 134, 144 (Alaska 2002). Also,
contract rescission is an equitable, not a statutory, remedy.
See McKeown v. Kinney Shoe Co., 820 P.2d 1068, 1071 (Alaska
1991).
20 See 2 Dan B. Dobbs, The Law of Torts 474 (2001)
(stating that plaintiff who enters into transaction without
belief in truth of misrepresentation does not rely on
misrepresentation). See also Restatement (Second) of Torts 548
cmt. a (1977); 37 Am. Jur. 2d Fraud and Deceit 242 (2001).
21 Tesoro Alaska Petroleum Co. v. Kenai Pipe Line Co., 746
P.2d 896, 905 (Alaska 1987) (citing State v. Alex, 646 P.2d 203,
208 & n.4 (Alaska 1982)).
22 Western Star Trucks, Inc. v. Big Iron Equip. Serv.,
Inc., 101 P.3d 1047, 1050 (Alaska 2004) (citing Muller v. BP
Exploration (Alaska) Inc., 923 P.2d 783, 787 (Alaska 1996)).
23 Minutes, House Labor & Commerce Comm. on H.B. 237 19th
Legis. ( Mar. 15, 1995) (statement of Rep. Eldon Mulder, prime
sponsor of H.B. 237).
24 Tauese v. State, Dept of Labor & Indus. Relations, 147
P.3d 785, 821 (Haw. 2006); Doe v. Kansas Dept of Human Res., 90
P.3d 940, 946-47 (Kan. 2004).
25 Websters II New College Dictionary 774 (3d ed. 2005).
26 Id. at 156.
27 Cf. Field v. Mans, 516 U.S. 59, 66 (1995) (construing
obtain by in Bankruptcy Code to require causation). The
Salvation Army conceded at oral argument before us that obtain
likely required some causal connection between the false
statement and the benefits.
28 AS 23.30.250(b). The fourth element set out in the
Devon test requires causation: The fourth element is that the
statements or representations resulted in the employee obtaining
a benefit. Municipality of Anchorage v. Devon, 124 P.3d 424, 429
(Alaska 2005). AS 23.30.250(b) also requires that the statements
or representations be made for the purpose of obtaining benefits.
29 Cf. Turnbull v. LaRose, 702 P.2d 1331, 1335 (Alaska
1985) (noting that one cannot be induced to enter into an
agreement as a result of a later misrepresentation).
30 We assume that the duty the commission identified would
have required Shehata to report his employment to the Salvation
Army before his October 14 conversation with the adjuster,
because otherwise it could not serve as an independent
misrepresentation. The commission did not specify a date by
which Shehata was required to report his work at Totem.
31 At oral argument before us, the Salvation Armys
position about the duty to disclose work was somewhat unclear.
When asked whether it would have been able to bring a fraud claim
against Shehata if he had told the truth on October 14, 2005,
conversation, counsel for the Salvation Army said no. He later
explained that had Shehata told the truth, the employer could
have adjusted his benefits based on an overpayment and calculated
temporary partial disability benefits. If a fraud reimbursement
order could be based on a failure to disclose employment, Shehata
would have violated a duty to disclose by not reporting that he
was working whether or not he told the truth on October 14.
32 AS 23.30.250(b). In contrast, the disqualification
section of the Alaska Employment Security Act includes failure to
disclose or report a material fact as a basis for
disqualification. AS 23.20.387. Also, the employment security
regulations set out an affirmative duty to provide information on
eligibility. See 8 Alaska Administrative Code (AAC) 85.104(a)
(2004).
33 Municipality of Anchorage v. Devon, 124 P.3d 424, 429
(Alaska 2005).
34 See Trapp v. State, Office of Pub. Advocacy, 112 P.3d
668, 674 n.16 (Alaska 2005) (citing Ellingstad v. State, Dept of
Natural Res., 979 P.2d 1000, 1006 (Alaska 1999) (noting that
expressio unis est exclusio alterius is useful and logical maxim
of statutory construction). We note as well that some state
workers compensation fraud statutes include omissions or
concealment as a basis for fraud. See, e.g., Haw. Rev. Stat.
386-98(a)(8) (2008); Kan. Stat. Ann. 44-5,120(d)(4)(B) (2000);
N.Y. Workers Comp. Law 114(1) (McKinney 2006).
35 See Arctic Tug & Barge, Inc. v. Raleigh, Schwarg, &
Powell, 956 P.2d 1199, 1202 (Alaska 1998) (citing Turnbull v.
LaRose, 702 P.2d 1331, 1334 (Alaska 1985)).
36 Stevenson v. Burgess, 570 P.2d 728, 733 (Alaska 1977).
37 We note that the federal workers compensation system
and some states require workers compensation recipients to file
forms periodically disclosing receipt of wages. See 20 C.F.R.
10.525, 10.528 (2008) (requiring claimant to notify department
immediately of return to work and to submit reports of earnings);
La. Admin. Code tit. 40, pt. 1, 1903 (2008) (requiring periodic
filing of earnings); N.D. Cent. Code 65-01-02(22), - 05-02, - 05-
08(3) (2003 & Supp. 2007) (requiring employee to report work or
income from work and workers compensation agency to provide
reporting forms). See also Wolford v. Pinnacol Assurance, 107
P.3d 947, 949 (Colo. 2005) (noting requirement that claimant file
sworn statements to receive TTD benefits).
38 Justifiable reliance is the cause-in-fact element in
the common law tort of misrepresentation. Restatement (Second)
of Torts 546 cmt. a (1977).
39 From the record, it appears that Shehata could be
liable for at most one week of benefits. Because Shehata did not
work at Totem after October 14, we assume he was eligible for TTD
benefits during the week of October 17, 2005.
40 AS 23.30.001(1).
41 AS 23.30.155(e).
42 AS 23.30.155 (a), (d)-(e).
43 We express no opinion about the boards award of
attorneys fees, which Shehata did not raise as a separate issue.
Because we reverse part of the underlying reimbursement order, we
leave it to the board to determine whether the Salvation Armys
fee award should be adjusted.
44 See supra Part IV.A.
45 AS 23.30.008(d).
46 Crawford & Co. v. Vienna, 744 P.2d 1175, 1178 n.3
(Alaska 1987).
47 Municipality of Anchorage v. Devon, 124 P.3d 424, 429
(Alaska 2005).
48 In any event, the boards fee award included attorneys
fees related to discovery, and Shehata did not appeal the
discovery issues to the commission.
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