Sunday, December 4, 2016

Constitutional Law in Florida 2016

Every year, the Florida Office of Judges of Compensation Claims submits a report regarding the state of Florida's adjudication system. This year's report is in the proofing stage and will be published close to November 30, 2016. The following is an excerpt from that report.

The landscape of Florida workers’ compensation has been less than stable in recent years. In fiscal 2012-13, the Florida First District Court of Appeal (DCA) rendered a panel decision in Westphal v. City of St. Petersburg on February 28, 2013. The panel held section 440.15(2)(a), Florida Statutes, unconstitutional in its limitation of temporary benefits to a period not exceeding 104 weeks. Later, in fiscal 2013-14, that panel decision, relying on “natural justice,” was withdrawn and rehearing by the entire court (en banc) was granted. On September 23, 2013, the court issued an en banc decision, which abandoned the panel opinion references to constitutional infirmity and relied instead on statutory interpretation. The Florida Supreme Court issued its decision on June 9, 2016, Westphal v. City of St. Petersburg, 194 So.3d 311. This decision invalidates as unconstitutional the 104 week limitation on temporary total disability benefits.

The Supreme Court’s decision is notable for what it addresses and for what it ignores. Finding that the 104 week limitation in section 440.15(2)(a), Florida Statutes (1994), unconstitutional, the Court revived the provisions of that section prior to the 1994 revisions. In essence, the decision invalidates a 22 year old statutory limitation that has been applied in the claims of thousands of injured workers. The limitation on temporary total benefits would seem to be the 260 week limitation on temporary total previously in section 440.15(2)(a). This is a limitation that the court notes it “previously held ‘passes constitutional muster.’” Westphal, at 315. Despite this, there are those who question whether the 260 week limitation would survive review by the present court, and wonder if the prior restriction of 350 weeks may eventually be revived by a future constitutional challenge.

The Westphal Court did not address the issue of temporary partial disability benefits in 2016. Scholars will explain that this is because temporary partial (“TPD”) benefits were not squarely before the Court. However, critics argue that because the 1994 amendments intertwined these two benefits, and that the 1994 limitation of 104 weeks applied to any combination of TTD and TPD, that any revival of the prior law’s TTD provision must likewise address TPD. Despite this, the Court elected not to address TPD benefits and thus the Westphal decision leaves doubt and uncertainty in the Florida employment marketplace.

Some contend that an injured worker is entitled to a maximum of 250 weeks (almost five years) TTD benefits and an additional 104 weeks of TPD benefits. Some argue that the legislative intent of the 1994 combination of  limitations should result in the overall entitlement to temporary benefits (TTD or TPD) should be 260 weeks under the Westphal analysis. With no consensus, and with the Court declining to delineate with more specificity, the result is doubt that will have to be resolved with additional litigation.

On October 23, 2013, the First DCA issued an opinion in Castellanos v. Next Door Company. This claim challenged the amount of attorney’s fees awarded pursuant to section 440.34, Florida Statutes. Counsel for the injured worker claimed that the fee resulting from application of this statute was inadequate and that therefore this statutory provision is unconstitutional. The First DCA concluded that “the statute is constitutional, both on its face and as applied.” That was also certified to the Supreme Court as a question of “great public importance.”

Castellanos was a continuation of the attorney fee dispute litigated extensively following passage of the 2003 reforms. That litigation culminated in the October 2008 decision of the Florida Supreme Court in Murray v. Mariner Health.

The Florida Supreme Court delivered its decision on April 28, 2016, in Castellanos v. Next Door Company. The Court was unable to conclude that the statutory limitation on attorneys’ fees was unconstitutional on its face. The Court elected not to declare the statute unconstitutional as applied to Castellanos. The Court instead concluded that any limitation in Florida law that does not afford judicial discretion is an irrebuttable presumption and unconstitutional. An academically honest interpretation of the implications of this decision may be broad and potentially impact a variety of Florida statutory parameters, both within workers’ compensation and beyond. The effect of the Court’s Castellanos decision is destruction of any objective limitation on claimant attorneys’ fees under section 440.34. The sole remaining limitation on fees is now a determination of “reasonable” by the Judge of Compensation Claims.

The limitation of “reasonable” is not new to attorneys’ fees in workers’ compensation. In the original Florida Workers’ Compensation Statute section 5966 required approval of the commission for legal service fees, §5966(34), Fla. Stat. In 1955, the modifier “reasonable” was added to what was by then section 440.34, Florida Statutes, (“be awarded reasonable attorney fee, to be approved by the commission”). That modifier requiring reasonableness was present thereafter in section 440.34, but the measure of reasonableness was modified.

The Florida Supreme Court concluded that the Canons of Professional Ethics, governing the ethics of attorneys’ fees, was “a safeguard in fixing the amount of [E/C-paid] fees awarded to the claimant.” In 1966, the Florida Supreme Court rendered Lee Engineering & Constr. Co. v. Fellows, 209 So.2d 454 (Fla. 1966). There the Court concluded that a “schedule of fees ... was helpful but unreliable.” The Court therefore directed that “reasonable” fees be awarded instead, and delineated a series of considerations, or “factors,” to be analyzed in determining reasonableness. Those became commonly referred to as the “Lee Engineering Factors.” As the Court noted in Castellanos, the process became one in which “the JCC applied the formula and then increased or decreased the amount after consideration of the factors in order to determine a reasonable fee.” Castellanos, 440.

This process was codified in the 1977 legislature, which statutorily adopted “factors” to be considered in deviating from the statutory formula fee. Those factors were divided into paragraphs (a) through (h). This remained the same until 1994 when further revisions were made to section 440.34, Florida Statutes (1994). The formula was altered, and the factors were reduced, resulting in a similar but shorter list of (a) through (f). In 2003 judicial discretion for deviation from the formula was removed from the statute. However, the word “reasonable” remained modifying “attorney fee.”

Following a series of challenges, the Florida Supreme Court in Murray v. Mariner Health elected to not address the constitutionality of section 440.34, Florida Statutes. Instead the Court relied upon a statutory interpretation centered on the continued presence therein of the word “reasonable.” Concluding that “reasonable” was inconsistent with the percentage restrictions of the 2003 statute, the Court concluded that attorneys were entitled to “reasonable” fees despite the seeming limitation of the statutory percentage calculation.   

Following rendition of the Supreme Court’s Murray decision, in the spring of 2009, the Florida Legislature amended section 440.34, Florida Statutes (2003), to remove “reasonable,” and, thus, to again forbid hourly fees. It was this statute which faced review in Castellanos, and which has been declared invalid. Thus, from some perspectives the 1994 attorney fee statute would seemingly be revived. The Court in Castellanos endorsed revival: “our holding that the conclusive fee schedule in section 440.34 is unconstitutional operates to revive the statute's immediate predecessor.” The Court did not articulate specifically what it perceived to be the “immediate predecessor.”

The Court then declared "Only where the claimant can demonstrate, based on the standard this Court articulated long ago in Lee Engineering, that the fee schedule results in an unreasonable fee—such as in a case like this—will the claimant's attorney be entitled to a fee that deviates from the fee schedule.”  And, thus, without stating specifically, the Court clarified that the “immediate predecessor” is more likely the 2003 statute, not the 1994 statute. This is logical as that statute, including “reasonable” is the “immediate predecessor” of the 2009 statute (sans “reasonable”) that is stricken by Castellanos.  Thus, the parameters of Lee Engineering (that is, (a) through (h)) are appropriate considerations based upon the Court’s pronouncement. The arguments for the more limited analysis, (section 440.34, considerations (a) through (f)) seem unsupported.

The Castellanos decision departs from the usual analysis of constitutional infirmity. The usual course would consider constitutionality whether “on its face” or “as applied.” Few considered a “facial” determination to be a likely outcome. Meanwhile, many saw a variety of procedural obstacles to future litigation if the court determined the statute unconstitutional “as applied.” The Judges of Compensation Claims lack authority to make any determination of constitutionality. Thus, any “as applied” analysis by the court was perceived as setting the stage for a parade of claims to the First District Court of Appeal for case-by-case determinations of appropriate fees following any “as applied” decision.

The court instead adopted a very broad analysis of presumptions in Castellanos. Though section 440.34 does not include the word “presumptive” or “presumption,” the court engaged an analysis focusing upon its conclusion that any limitation or parameter, which is not subject to challenge, is an “irrebutable presumption” and as such is facially unconstitutional. By this legal standard, implying “presumption,” a great many statutory parameters and limitations might likewise be unconstitutional. Caps and limitations including speed limits, statutes of limitations and minimum sentence requirements are but a few that might similarly be misinterpreted as “irrebuttable presumptions.”

The impact of the Castellanos and Westphal decisions was immediate. In May 2016, the National Council on Compensation Insurance sought a 17.1% rate increase based upon the Castellanos decision and the legislative adjustments to the Florida medical fee schedule. Following the publication of Westphal, an amended filing was made requesting an increase of 19.6%. 

The Florida Office of Insurance Regulation (OIR) denied that request September 27, 2016, finding it had “not been justified.” The OIR instead approved a 14.5% increase in rates effective December 1, 2016. An attorney that represents injured workers filed a lawsuit against the Florida Office of Insurance Regulation and the National Council of Compensation Insurance. 

The allegations of this suit were broad and included claims that the process for determining proposed rates in Florida workers’ compensation violated the requirements of open government (Sunshine law), and that the rate-determination process should be both enjoined at that time and altered in future proceedings.  

On November 23, 2016, the Circuit Court held the process violated the Florida Sunshine Law and enjoined the rate increase. The Office of Insurance Regulation filed an appeal on November 29, 2016. As the appeal was filed by a governmental agency, the trial court decision was stayed pending appeal. The rate increase thus became effective December 1, 2016. The ultimate outcome is unknown. 

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