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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

Shehata v. Salvation Army (3/12/2010) sp-6460, 225 P3d 1106

     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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