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DeNuptiis v. Unocal Corp. (1/31/2003) sp-5657
DeNuptiis v. Unocal Corp. (1/31/2003) sp-5657
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
TIMOTHY DENUPTIIS, )
) Supreme Court No. S-10098
Appellant, )
) Superior Court No.
v. ) 3AN-00-3660 CI
)
UNOCAL CORPORATION ) O P I N I O N
and the ALASKA WORKERS' )
COMPENSATION BOARD, )
)
Appellee. ) [No. 5657 - January 31, 2003]
)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Fred Torrisi, Judge.
Appearances: Joseph A. Kalamarides, Randall
S. Cavanaugh, Kalamarides & Lambert, Inc.,
Anchorage, for Appellant. Richard L. Wagg,
Russell, Tesche, Wagg, Cooper & Gabbert,
Anchorage, for Appellee Unocal Corporation.
Before: Fabe, Chief Justice, Matthews,
Eastaugh, and Carpeneti, Justices. [Bryner,
Justice, not participating.]
MATTHEWS, Justice.
The main question presented is whether the Workers'
Compensation Board erred in applying a clear and convincing
standard of proof to an employer's claim for reimbursement of
benefits based on fraud. We conclude that it did. Alaska
Statute 44.62.460(e) directs that the standard of proof in
administrative hearings be by a preponderance of the evidence,
unless applicable law specifies a different standard. As no
statute or rule relating to reimbursement claims addresses the
issue of what standard of proof is appropriate, the default
standard of this section applies.
I. FACTS AND PROCEEDINGS
Timothy DeNuptiis was injured while working for Unocal
in September 1996. An accident on an oil platform left him
unable to work for several periods in 1996 and 1997 due to pain
in his neck, wrist, and lower back. Unocal paid $700 per week in
temporary total disability benefits from September 9 to October
13, 1996; December 13 to December 15, 1996; and May 12 to October
19, 1997.
In November 1997 Unocal filed a controversion notice
with the Alaska Workers' Compensation Board, claiming that it had
collected evidence on several surveillance videotapes "that
[DeNuptiis] is exaggerating his claims to obtain benefits."
Unocal further explained that " [DeNuptiis] has been determined
able to return to work as of 6-8-97 based on the report of Dr.
Brockman," an orthopedic surgeon who examined DeNuptiis at
Unocal's request. Unocal stated that it was "pursuing recovery
pursuant to AS 23.30.250."
Alaska Statute 23.30.250(a) imposes civil liability and
criminal penalties for knowing false statements in workers'
compensation cases.1 Subsection .250(b) authorizes the board to
order reimbursement of fraudulently obtained benefits and costs
and fees incurred in obtaining reimbursement and in defending any
claim for benefits:
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 employer's 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).[2]
Neither subsection specifies a standard of proof.
Unocal argued before the board that it should apply the
preponderance standard. DeNuptiis advocated the higher clear and
convincing standard.3
The board concluded that clear and convincing was the
appropriate standard to be used in section .250 claims. Noting
that Unocal's charge was essentially that DeNuptiis was
malingering to obtain benefits, the board quoted and agreed with
Professor Larson's recommendation that malingering should be
found "only upon positive and convincing evidence":
[A] heavy burden should be upon the party
that alleges malingering. . . . There are
several reasons for such a rule. One is that
a mistaken inference here works a
particularly severe hardship, for if the
claimant is in fact genuinely disabled, he or
she suffers the double blow of being deprived
of compensation and of being publicly labeled
a liar and a cheat. Another is the pervading
remedial character of [workers' compensation]
legislation. Still another is the imperfect
state of medical knowledge in many of the
fields here involved, in spite of spectacular
advances in recent decades.[4]
The board also supported its conclusion with a number
of reasons:
[W]e find a 250 petition is criminal in
nature. The statute provides for punishment
under AS 11.46.180, theft by deception.
Second, the implications of our finding a
250 petition violation has severe and
serious financial implications under 250(b).
Third, a stigma is associated with an
individual being labeled a "malinger[er]" or
"liar" or the like. Next, from a policy
perspective, proving a mere preponderance of
evidence to terminate all benefits under a
250 petition does not strike a chord of
fairness; employers have much greater
resources with which to investigate.
Finally, the elements of a 250 petition
should be more difficult to prove to avoid
the use of 250 as a sword to coerce an
employee every time a minor inconsistency in
the evidence is found.
The board then proceeded to evaluate the evidence based
on the clear and convincing standard. It concluded that Unocal
had failed to prove that DeNuptiis had made knowingly false
statements in support of his benefits claim and denied Unocal's
request for reimbursement. But two of the three board members
filed a separate statement indicating that if the preponderance
of the evidence standard had been used they would have found in
favor of Unocal.
Unocal petitioned for reconsideration on the standard
of proof issue. The board granted reconsideration but reaffirmed
its earlier ruling:
Having granted reconsideration, we now
consider whether our decision in DeNuptiis II
adopting the "clear and convincing" standard
of proof was proper. For the reasons
detailed below, we reaffirm our decision that
the standard should be "clear and convincing"
evidence. We have considered the employer's
argument and reviewed the applicable caselaw.
Nevertheless, we continue to find the
criminal sanctions provided under a 250
petition, and the ramifications therein,
mandate a higher standard of proof than
"preponderance of the evidence." The caselaw
on which the employer relies is civil and
does not have criminal sanctions intertwined.
Furthermore, an employee enjoys the
presumption of compensability. AS
23.30.120. Therefore, we find it would be
inconsistent to authorize an employer to
unilaterally cease payments of benefits on an
alleged violation of 250, based on a
preponderance of evidence. Utilizing such a
standard would run contrary to the provisions
of AS 23.30.120 which protect an injured
worker from having his or her benefits
terminated. Therefore, we find a higher
standard of proof is required.
Unocal appealed to the superior court. On appeal,
Superior Court Judge Karen L. Hunt ruled that the board should
have used a preponderance of the evidence standard of review.
Judge Hunt reasoned that subsection (b) of section .250 is a
civil remedial provision and that while it contains no indication
as to what standard of proof should be used, civil fraud in
Alaska, in the absence of statute, has traditionally been proved
using a preponderance of the evidence standard.5 Judge Hunt also
relied on AS 44.62.460(e), a subsection of the Administrative
Procedure Act, that calls for a preponderance of the evidence
standard of proof "unless a different standard of proof is stated
in the applicable law." Judge Hunt found that reimbursement
claims were governed by this provision.
On remand from the superior court's decision, the board
concluded by a two-to-one margin that Unocal had shown by a
preponderance of the evidence that DeNuptiis "knowingly made
false and misleading statements to obtain benefits." On appeal
to the superior court, Judge Fred Torrisi ruled that Judge Hunt's
earlier decision on the standard of proof was the law of the
case. He found that the board's decision was supported by
substantial evidence and affirmed it. This appeal followed.
II. DISCUSSION
A. The Standard of Proof To Be Used in Reimbursement
Claims Is the Preponderance of the Evidence Standard.
The question of what standard of proof applies to a
given issue in a given case is a question of law. Ordinarily we
use our independent judgment on questions of law unless the
"issue involves agency expertise or the determination of
fundamental policy questions on subjects committed to the
agency."6 If the issue involves agency expertise or fundamental
policy questions, we review under the reasonable basis standard
and defer to the agency if its interpretation is reasonable.7 We
believe that the board's decision to apply a clear and convincing
standard of proof is a policy decision that should be reviewed
deferentially. The board found that the clear and convincing
standard was necessary to prevent the threat of a reimbursement
suit from being used for coercive purposes against an employee.
In effect, the board decided that the heightened standard of
proof was necessary to maintain a fair balance between the
interests of employees and those of employers. This is a policy
determination.
Further, the board has been delegated broad powers to
administer the Workers' Compensation Act. "The Board is
authorized to formulate policy, interpret statutes, adopt and
enforce regulations."8 Specifically, the Department of Labor may
adopt, subject to approval by a majority of the board, "rules for
all panels; and . . . regulations to carry out the provisions of
[the Workers' Compensation Act]."9 In conducting a hearing, "the
board is not bound by common law or statutory rules of evidence
or by technical or formal rules of procedure, except as provided
by [the act]."10 Further, the board has been delegated the
authority to "conduct its hearings in the manner by which it may
best ascertain the rights of the parties."11 Since the board's
decision to use a clear and convincing standard of proof was
policy-based and concerned a subject that is within the general
authority of the board, we will uphold the decision of the board
if it can be said to be a reasonable interpretation of governing
law.12
A subsection of the Administrative Procedure Act, AS
44.60.460(e)(1), calls for a default standard of proof by a
preponderance of the evidence in cases where another standard of
proof is not set by applicable law: "Unless a different standard
of proof is stated in applicable law the (1) petitioner has the
burden of proof by a preponderance of the evidence . . . ."
This section applies to hearings before the Workers'
Compensation Board. Alaska Statute 44.62.330(a)(15) includes the
Alaska Workers' Compensation Board within the coverage of the
Administrative Procedure Act "where procedures are not otherwise
expressly provided by the Alaska Workers' Compensation Act." In
a number of cases we have recognized the application of other
rules specified in AS 44.62.460 to workers' compensation
proceedings.13
Based on the board's delegated rulemaking authority,
the board could adopt a rule that the standard of proof in
reimbursement proceedings should be by clear and convincing
evidence. Such a rule could reasonably fall within the excepting
language of AS 44.62.460(e) as "a different standard of proof
. . . stated in applicable law." But no such rule exists and in
its absence subsection .460(e)(1) governs.14 We therefore
conclude that the board's application of the clear and convincing
standard in the present case was not a reasonable interpretation
of governing law.
B. The Preponderance Standard Is Not
Unconstitutional.
DeNuptiis argues that applying a preponderance of the
evidence standard is unconstitutional on due process and equal
protection grounds. His premise as to both grounds is that AS
23.30.250(b) remedy is penal, and that because of this, a
heightened standard of proof is required. But this premise is
incorrect, as subsection .250(b) only requires restitution of
benefits that were fraudulently obtained and reimbursement of the
employer's expenses occasioned by the fraud.15
Due process does require a heightened standard of proof
in certain categories of civil cases. Thus in Santosky v. Kramer16
the United States Supreme Court held that a standard at least as
demanding as clear and convincing evidence was necessary in
termination of parental rights cases. Similar elevated standards
are necessary in involuntary civil commitments,17 deportation
proceedings,18 and denaturalization proceedings.19 Each of these
categories involves sensitive liberty interests and each involves
attempts by the government to deprive individuals of such
interests. By contrast, the United States Supreme Court has held
that the preponderance of the evidence standard is adequate in
paternity cases where the main interest of the putative father is
avoiding the "serious economic consequences" that flow from a
court order establishing paternity.20 The United States Supreme
Court has also observed that in a civil case between private
parties involving a monetary dispute a preponderance of the
evidence standard is adequate: "The typical civil case involves
a monetary dispute between private parties. Since society has a
minimal concern with the outcome of such private suits,
plaintiff's burden of proof is a mere preponderance of the
evidence. The litigants thus share the risk of error in roughly
equal fashion."21
Due process does not require an elevated standard of
proof in every civil proceeding involving non-monetary liberty
interests. We held in Disciplinary Matter of Walton that
employing a preponderance standard in attorney disciplinary
proceedings satisfied due process: "[W]e are unwilling to hold
that the risk of an incorrect factual determination in a bar
disciplinary proceeding should be placed primarily on the public.
Because there are substantial interests on both sides, the risk
of error should be borne equally."22
The usual construct for determining whether a standard
of proof is appropriate is that suggested by Mathews v. Eldridge.23
Three factors are considered:
the private interest affected by the official
action; the risk of an erroneous deprivation
of such interest through the procedures used
and the probable value, if any, of additional
or substitute procedural safeguards; and
finally, the government's interest, including
the fiscal and administrative burdens that
additional or substitute procedural
requirements would entail.[24]
In considering these factors a strong presumption of validity
must be afforded to the legislature's choice as to the
appropriate standard.25
The Mathews factors are directly aimed at cases
involving litigation between the government and a private
individual. Adapting them to this case, they do not point to a
conclusion that the preponderance standard is unconstitutional.
The interest of the litigants on both sides is primarily
monetary.26 It is not fundamentally unfair that they share the
risks of an erroneous decision roughly equally. Of course
substitute safeguards might be applied. A more demanding
standard could be imposed on the employer. While as a matter of
policy this might be a wise choice, we are unable to say that it
is constitutionally required. The parties' main interests are
economic and their interests are equal in the eyes of the law.
Further, a worker's economic interests do not stand on a higher
footing than the economic interests of any litigant against whom
a civil fraud claim is brought. As noted, in civil fraud cases
we have applied a preponderance standard.27 There are at least
two governmental interests involved. The first is the interest
that underlies the workers' compensation system: making adequate
compensation available to injured workers expeditiously and
without undue cost. The second is to deter and redress fraud.28
In the context of this dispute these goals point in opposite
directions; they are sufficiently balanced as not to dictate any
particular conclusion on the question before us.
Considering, then, the three Mathews factors, the
presumption of statutory validity, the standard we use in civil
fraud cases, and the nature of the civil cases in which a
heightened standard of proof has been found to be
constitutionally required, we conclude that employing a
preponderance standard in subsection .250(b) cases does not
violate due process.
DeNuptiis's equal protection arguments are that persons
subject to subsection .250(a) have more protection than workers
subject to subsection .250(b), and that taxpayers subject to
civil fraud claims have the protection of a clear and convincing
evidence standard.29 But the premise of the argument concerning
persons subject to subsection .250(a) is false, for there is no
reason to think that those who are merely civilly liable under
subsection .250(a) are in fact protected by a clear and
convincing evidence standard. Based on our case law, we assume
that the standard of proof in such cases would be by a
preponderance of the evidence.30 Likewise, DeNuptiis's argument
that taxpayers accused of fraud are protected by a clear and
convincing standard is unavailing to show a denial of equal
protection. Taxpayers are subject to penalties in addition to
the amount of taxes they owe,31 whereas the subsection .250(b)
remedy is limited to restitution and reimbursement.
C. Appellant's Other Points Lack Merit.
DeNuptiis also argues that the board's decision is not
supported by substantial evidence in general or in particular
with respect to the termination date for his benefits. While
there is conflicting evidence concerning whether DeNuptiis
knowingly made a false statement or representation in order to
obtain benefits, there is substantial evidence to support the
board's decision.32 DeNuptiis did present evidence of an
injury. Dr. Kufel and Jeanette Lawson reported objective
evidence of an injury to DeNuptiis's neck. Jeannette Lawson
testified that DeNuptiis's biofeedback test results were
consistent with his reports of pain, and that those results would
be very difficult to falsify. At the same time, however, the
videotapes showed that DeNuptiis's condition changed
dramatically, sometimes within only a short time after he
reported worsening pain. Dr. Kufel's testimony showed, for
example, that DeNuptiis represented his injury as "getting worse"
just two days before he was filmed exhibiting a full range of
motion. Drs. Brockman and James testified that there was no
physiological reason to explain these inconsistencies between
DeNuptiis's appearance at the clinics, at the deposition, and on
the surveillance tapes. Dr. James opined that DeNuptiis was
malingering. Dr. Brockman opined that they could only be
explained by a "[m]iraculous cure."
DeNuptiis's last argument is that instead of a June 7,
1997 cut-off date for his benefits, the board should have used
November 12, 1997, the date on which two doctors formally
expressed their opinions that he was malingering. But the
board's use of June 7, 1997, is based on substantial evidence.
That was the date that DeNuptiis was videotaped participating in
various activities in which he exhibited no irregular neck
posture. Dr. Brockman testified that DeNuptiis was at that point
healthy enough to go back to work.
III. CONCLUSION
We conclude that Judge Hunt correctly remanded this
case to the board with instructions to employ a preponderance of
the evidence standard, that this standard is constitutional, and
that the board's decision on remand from Judge Hunt's order is
supported by substantial evidence. The decision of the superior
court affirming that decision is therefore AFFIRMED.
_______________________________
1AS 23.30.250(a) provides:
A person who . . . knowingly makes a
false or misleading statement,
representation, or submission related to a
benefit under this chapter . . . is civilly
liable to a person adversely affected by the
conduct, is guilty of theft by deception as
defined in AS 11.46.180, and may be punished
as provided by [the sentencing provisions] AS
11.46.120 -11.46.150.
2AS 23.30.250(b).
3The difference between the two standards is as follows:
Where one has the burden of proving
asserted facts by a preponderance of the
evidence, he must induce a belief in the
minds of the jurors that the asserted facts
are probably true. If clear and convincing
proof is required, there must be induced a
belief that the truth of the asserted facts
is highly probable.
Spenard Action Comm. v. Lot 3, Block 1, Evergreen Subdivision,
902 P.2d 766, 774 n.15 (Alaska 1995) (citations omitted).
42 A. Larson, The Law of Workmen's Compensation 42.24(d) (1994)
(citation omitted) (now 3 A. Larson, Workers' Compensation Law
56.05[4] (1999)).
5Judge Hunt cited Gabaig v. Gabaig, 717 P.2d 835, 838-39 (Alaska
1986) and Saxton v. Harris, 395 P.2d 71, 72 (Alaska 1964).
6O'Callaghan v. Rue, 996 P.2d 88, 94 (Alaska 2000).
7Id.; Lakosh v. Alaska Dep't of Envtl. Conserv., 49 P.3d 1111
(Alaska 2002).
8Wausau Ins. Cos. v. Van Biene, 847 P.2d 584, 587 (Alaska 1993).
9AS 23.30.005(h).
10AS 23.30.135(a).
11Id.
12O'Callaghan, 996 P.2d at 94; Mukluk Freight Lines, Inc. v.
Nabors Alaska Drilling, Inc., 516 P.2d 408, 411-12 (Alaska 1973).
13See Whaley v. Alaska Workers' Compensation Bd., 648 P.2d 955,
957-58 (Alaska 1982); Commercial Union Cos. v. Smallwood, 550
P.2d 1261, 1266-67 (Alaska 1976); Employers Commercial Union Ins.
Group v. Schoen, 519 P.2d 819, 823-24 (Alaska 1974); Cook v.
Alaska Workmen's Compensation Bd., 476 P.2d 29, 31 (Alaska 1970).
14Assuming that "applicable law" might reasonably include a well-
established decision law principle as to the applicable standard
of proof, we note that there is no well-established principle in
Alaska that civil fraud claims are governed by a clear and
convincing standard. To the contrary, our common law decisions
require only a preponderance of the evidence. Dairy Queen of
Fairbanks, Inc. v. Travelers Indem. Co. of America, 748 P.2d 1169
(Alaska 1988); Gabaig v. Gabaig, 717 P.2d 835, 838 (Alaska 1986);
Saxton v. Harris, 395 P.2d 71 (Alaska 1964). Further, it seems
that in the only board ruling, the board employed a preponderance
of evidence standard to a reimbursement claim, although neither
party argued that a higher standard should have been employed.
Gourley v. Qwick Constr., AWCB Decision No. 97-0255 (December 15,
1997).
15The caption to section .250 is "Penalties for fraudulent or
misleading acts." But captions are not part of the statute. See
AS 01.05.006; Ketchikan Retail Liquor Dealers Ass'n v. State,
Alcoholic Beverage Control Bd., 602 P.2d 434, 438 (Alaska 1979)
("[H]eadings are not part of the law of Alaska."), modified on
other grounds by 615 P.2d 1391 (Alaska 1980).
16455 U.S. 745 (1982).
17Addington v. Texas, 441 U.S. 418, 425 (1979).
18Woodby v. Immigration & Naturalization Servs., 385 U.S. 276, 277
(1966).
19Chaunt v. United States, 364 U.S. 350, 353 (1960).
20Rivera v. Minnich, 483 U.S. 574, 580-81 (1987).
21Id. at 578 n.5 (quoting Addington, 441 U.S. at 423).
22676 P.2d 1078, 1085 (Alaska 1983) (footnote omitted).
23424 U.S. 319, 332 (1976).
24Keyes v. Humana Hosp. Alaska, Inc., 750 P.2d 343, 353 (Alaska
1988).
25Rivera, 483 U.S. at 578.
26A worker might suffer some degree of harm to his reputation if
the board were to find that he obtained benefits fraudulently.
However, a worker's reputational interest is not so fundamental
that it must be protected by a heightened standard. The
potential taint to an worker's reputation is no worse than the
taint suffered by any civil litigant found liable for fraud.
Additionally, the reputational interests of medical or legal
professionals can be substantially harmed if they are found
liable for malpractice, yet such proceedings employ a
preponderance standard. See Kaiser v. Sakata, 40 P.3d 800, 805
n.16 (Alaska 2002); Shaw v. State, Dep't of Admin., 861 P.2d 566,
572 (Alaska 1993); and Dairy Queen of Fairbanks, Inc. v.
Travelers Indem. Co. of America, 748 P.2d 1169, 1171 (Alaska
1988).
27See cases cited note 14 supra.
28See Dairy Queen, 748 P.2d at 1172 (noting "compelling" public
policy reasons for applying preponderance standard in cases of
arson and false swearing).
29DeNuptiis cites 15 Alaska Administrative Code (AAC) 05.230(d).
30Of course, subsection .250(a) is also a criminal statute.
Persons accused of the crime it defines are protected by a
standard of proof beyond a reasonable doubt. This differential
treatment is justified by the risk of criminal sanctions.
3115 AAC 05.230(b) imposes a fifty percent penalty calculated on
the tax deficiency.
32DeNuptiis argues that the evidence presented is consistent with
his claim of injury. He asserts the evidence shows only that he
had "good and bad days." He points to the testimony of other
witnesses at the hearing that they saw DeNuptiis in pain.
