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Public Employee Claims Division v. Gary Clark and North Arkansas Livestock Auction, Inc.

Court of Appeals of Arkansas, Division IV

March 28, 2018

PUBLIC EMPLOYEE CLAIMS DIVISION APPELLANT
v.
GARY CLARK AND NORTH ARKANSAS LIVESTOCK AUCTION, INC. APPELLEES

          APPEAL FROM THE CARROLL COUNTY CIRCUIT COURT, EASTERN DISTRICT [NO. 08ECV-13-38] HONORABLE SCOTT JACKSON, JUDGE

          Robert H. Montgomery, Public Employee Claims Division, for appellant.

          Ray Hodnett, for appellee.

          N. MARK KLAPPENBACH, JUDGE

         The Public Employee Claims Division (PECD) appeals the Carroll County Circuit Court's order awarding it $23, 345 on its complaint in intervention. PECD argues that it should have been awarded a larger sum pursuant to Arkansas Code Annotated section 11-9-410 (Repl. 2012). We reverse and remand.

         In 2010, appellee Gary Clark was seriously injured while working as a veterinary livestock inspector for the Arkansas Livestock and Poultry Commission. Clark was paid workers'-compensation benefits for his injuries. In 2013, Clark filed a negligence suit against North Arkansas Livestock Auction, Inc. (NALA), the entity responsible for the facility where he was working when injured. PECD subsequently moved to intervene in the lawsuit and filed a complaint in intervention. PECD alleged that, as the workers'-compensation-claims administrator for the Arkansas Livestock and Poultry Commission, it had paid workers'-compensation benefits to Clark and was entitled to an absolute lien against two-thirds of the net proceeds of any settlement or judgment in Clark's favor on his complaint pursuant to Arkansas Code Annotated sections 11-9-410 and 21-5-605.[1] Clark had no objection to the motion to intervene, and intervention was granted.

         Clark's case against NALA proceeded toward trial but was ultimately settled for $325, 000. Clark's attorney subsequently deposited $75, 000 into the registry of the court in February 2016. A "post settlement hearing" between Clark and PECD was held in May 2016. In describing the issue before the court, Clark's attorney stated that "at the time we settled this case we deposited into the registry of the court $75, 000, and of course they are trying to establish a lien on that amount. We are trying to establish that he will not be made whole, even by receiving that money."

         PECD introduced evidence at the hearing showing that Clark had received more than $66, 000 in benefits for temporary total disability and permanent partial disability and that more than $154, 000 in medical expenses had been paid on his behalf. The PECD employee handling Clark's claim testified that his claim was still open and that PECD continued to pay for medical treatment. Clark agreed that he had received these benefits but noted that he did not receive his full wages while off work. Clark testified that he agreed to settle his case against NALA for $325, 000; he said that $100, 000 of this sum went to attorneys' fees, $10, 000 went to costs, $75, 000 was deposited into the registry of the court, and he received the rest. Although Clark had eventually returned to work full time after his injury, he testified that he still suffered from pain and mental anguish.

         PECD's trial brief was admitted into evidence without objection. Included in the brief were PECD's calculations showing that $126, 666.67 was available for subrogation under Arkansas Code Annotated section 11-9-410. Because more than $220, 000 had been paid to Clark or on Clark's behalf in his workers'-compensation claim, PECD argued that it was entitled to receive the entire balance available for subrogation. Clark's attorney pointed out that PECD's brief included incorrect amounts for costs of collection and attorneys' fees. The amounts were corrected and initialed by counsel for both sides and acknowledged by the circuit court.

         Clark argued that PECD could not recover anything because he had not been made whole by the settlement and workers'-compensation payments he had received. PECD contended that its entitlement to a lien was absolute and that the made-whole doctrine did not apply. The court took the matter under advisement and subsequently entered an order finding that PECD was entitled to receive two-thirds of the deposited funds after payment of costs of collection. The court calculated this amount to be $23, 345. PECD appealed from this order, but the appeal was dismissed without prejudice due to the lack of a final order. Pub. Emp. Claims Div. v. Clark, 2017 Ark.App. 224, 519 S.W.3d 333. The circuit court subsequently entered a final order that again awarded PECD the sum of $23, 345.

         On appeal, PECD argues that the circuit court's award is contrary to the applicable law and that it is entitled to recover a greater amount. As it did below, PECD relies on Arkansas Code Annotated section 21-5-605(f)(3)(B), which provides that in the event of a public employee's tort action against a third party,

the rights of the public employee, or his or her dependents, the public employer, and the division shall be governed by the provisions of § 11-9-410, provided, the rights of the public employer and the division in and to amounts received from the third party by the injured public employee, or his or her dependents, as a result of either settlement with or judgment against the third party shall be absolute.

PECD argues that this statute gives it an absolute right to a portion of the settlement proceeds received by Clark subject to the provisions of section 11-9-410. Arkansas Code Annotated section 11-9-410 provides that when an injured employee recovers damages against a third party, the employer or employer's carrier is entitled to a lien on two-thirds of the net proceeds for payment of the amount paid by them as workers'-compensation benefits. The statute provides that, before discharging the actual amount of the liability of the employer, reasonable costs of collection shall be deducted from the recovered amount and one-third of the remainder shall go to the injured employee. Ark. Code Ann. § 11-9-410(a)(2).

         According to PECD, the proper calculation here should start with the settlement amount of $325, 000 and deduct $100, 000 for attorneys' fees and $10, 000 for costs of collection. The net amount after these deductions is $215, 000. One-third of that amount, $71, 666.66, would be awarded to Clark, and the remaining two-thirds, or $143, 333.34, would be available for subrogation. PECD notes that this order of calculations was used by the supreme court in Public Employee Claims Division v. Chitwood, 324 Ark. 30, 918 S.W.2d 163 (1996). PECD argues that, because more than $220, 000 in ...


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