Opinion
No. 11–P–647.
2012-10-26
John R. FINN v. DEPARTMENT OF CORRECTION.
By the Court (RAPOZA, C.J., MILLS & GRAHAM, JJ.
Justice Mills participated in the deliberation on this case prior to his retirement.
MEMORANDUM AND ORDER PURSUANT TO RULE 1:28
The department of correction (DOC) appeals from a summary judgment entered in favor of its former employee, John R. Finn, on his complaint seeking rescission of a G.L. c. 152, § 48, lump sum workers' compensation settlement agreement. We affirm.
Background. The undisputed facts are as follows. Finn, a correction officer, was injured at work in September, 1990, and thereafter began receiving workers' compensation benefits from the DOC, a self-insured employer, for a permanent disability. Finn was subsequently awarded accidental disability retirement (ADR) benefits by the State board of retirement. His ADR entitlement, however, was offset by the workers' compensation benefits until the settlement here in issue. G.L. c. 32, § 14(2). Before settlement, Finn received combined workers' compensation and ADR benefits of $4,340.28 per month.
After a June, 2009, lump sum settlement ended his workers' compensation claim in exchange for a $10,000 payment, Finn was eligible to receive only the ADR benefits, which then totaled $2,417.79 per month. This discrepancy was due to the different methods the workers' compensation and ADR systems use to calculate benefit payments. In Finn's case, the workers' compensation system provided a weekly payment equivalent to two-thirds of his average weekly wage plus a supplemental, cost-of-living allowance. G.L. c. 152, §§ 34A– 34B. His total workers' compensation benefits were thus greater than the average weekly wage he earned while employed as a correction officer. Finn's attorney assumed that because the ADR benefits were paid at the rate of seventy-two percent of Finn's average weekly wage, G.L. c. 32, § 7(2), settling the workers' compensation claim for a nominal sum and receiving only ADR payments going forward would be in Finn's best interest. The attorney's calculation, however, did not factor in the effect of losing the supplemental workers' compensation benefit.
Because of the offset, Finn received no ADR benefits from approximately 1996 until the settlement date, June 12, 2009. His net benefit during this period was thus entirely derived from the workers' compensation system.
Under G.L. c. 152, § 48, as amended by St.1991, c. 398, §§ 74, 107, “a lump sum agreement shall not have been perfected until and unless approved by an administrative judge ... as being in the claimant's best interest.” Both Finn's attorney and the lawyer representing the DOC jointly presented Finn's settlement to an administrative judge as being in Finn's best interest. Neither attorney was then personally aware that Finn's ADR benefits alone would be lower than what he received while in the workers' compensation system. Nevertheless, according to an affidavit from Kelly J. Correira, DOC director of workers' compensation, the agency at some level “presumed” Finn's ADR benefits would be less than his workers' compensation benefits because employees in the DOC workers' compensation unit know how each are calculated.
Finn's complaint sought rescission on the ground of mutual mistake of fact, and he moved for summary judgment on that basis. He cited deposition testimony by the lawyer who represented the DOC during the lump sum settlement conference. The DOC cross-moved for summary judgment on the basis of the Correira affidavit, arguing that there had been no mistake on its part and that a workers' compensation settlement may be rescinded only on a showing of mutual mistake or fraud.
The Superior Court judge concluded that there had been no mutual mistake, the sole ground upon which Finn's complaint sought rescission. After referring to fraud and mistake as the customary grounds for seeking rescission, the judge went on to state that “other principles of equity” can also support such a request, citing Ferreira v. Arrow Mut. Liab. Ins. Co., 15 Mass.App.Ct. 633, 635 (1983). The judge then asserted that each party to a lump sum settlement is under an obligation to advise the administrative judge of the facts upon which each believes that the settlement is in the employee's best interest. He concluded that, on the facts of the present case, “[t]hat was not done here.” As a result, he rescinded the lump sum settlement agreement and remanded the matter to the Department of Industrial Accidents.
Discussion. Finn did not appeal from the judge's ruling, on the undisputed facts, that any mistake as to his benefits was not mutual. Consequently, that determination is not now reviewable. See Sullivan v. Liberty Mut. Ins. Co., 444 Mass. 34, 35 n. 1 (2005), citing Mass.R.A.P. 16(a)(4), as amended, 367 Mass. 921 (1975); TAL Financial Corp. v. CSC Consulting, Inc., 446 Mass. 422, 431 (2006).
The issue presented on appeal is whether the judge erred in ruling that the lump sum settlement agreement could be rescinded on a principle of equity other than fraud or mutual mistake. The DOC, citing LaFleur v. C.C. Pierce Co., 398 Mass. 254, 257 (1986), argues that an approved lump sum settlement agreement can be rescinded only on a showing of fraud or mutual mistake. It contends that the judge erred when he relied on Ferreira to rescind Finn's settlement on another ground. Finn, on the other hand, argues that Ferreira in fact does provide a Superior Court judge with the option of setting aside such a settlement based on “principles of equity.”
In Ferreira, an insurer sought rescission of a lump sum settlement that was formally approved after the employee's death. 15 Mass.App.Ct. at 634–635. The Ferreira court concluded in relevant part that a lump sum settlement entered into on the basis of an employee's terminal illness remains valid even if the employee dies in the interim between a preliminary administrative approval for which the insurer advocated and a final approval it opposed. Ibid. The court held that, “[b]arring mutual mistake, fraud or other principles of equity, we believe that when an instrument with the finality of an agreement for redeeming liability has been executed and filed with the Division, presented to the single member for approval at a hearing conference, and recommended for approval by that member, the insurer may no longer unilaterally rescind the agreement.” Id. at 635.
We first note that the Legislature significantly amended the Workers' Compensation Act in 1985, although many of the changes, including the one pertinent here, did not take effect until November 1, 1986. St.1985, c. 572, § 70. Effective that date, the Legislature for the first time included a reference to vacating or modifying a settlement agreement on grounds of law or equity. G.L. c. 152, § 19, as amended by St.1985, c. 572, § 33.
As amended, § 19 did not control, nor was it cited in, either Ferreira, which was decided in 1983, or LaFleur, which was decided in 1986, prior to the statutory change.
.Section 19 was further amended in 1987 and 1991, although in respects not relevant here.
We also note that G.L. c. 152, § 19, applies to § 48 lump sum settlement agreements. Bertocchi's Case, 58 Mass.App.Ct. 561, 563–564 (2003). In that context, G.L. c. 152, § 19(2), thus authorizes any party to such an agreement to file a complaint in Superior Court “to vacate or modify such agreement on grounds of law or equity,” without restriction. See Opare's Case, 77 Mass.App.Ct. 539, 541 n. 3 (2010).
Although the judge did not specifically reference G.L. c. 152, § 19, the statute supports the ground cited by him, i.e., that principles of equity other than fraud or mutual mistake may support the rescission of a lump sum settlement agreement. We therefore reject the DOC's claim that a lump sum settlement agreement may be set aside only for fraud or mutual mistake. Cf. Germagian v. Berrini, 60 Mass.App.Ct. 456, 459 (2004).
Accordingly, we conclude that the judge did not err in rescinding the lump sum agreement on other equitable grounds.
Judgment affirmed.