Federal Court Says Oklahoma’s Subrogation Statute is Constitutional

The U.S. District Court for the Western District of Oklahoma recently held that Oklahoma’s workers’ compensation subrogation statute, 85A Okla. Stat. § 43 does not violate Article 23, Section 7 of the Oklahoma Constitution [Akins v. C&J Energy Servs., 2019 U.S. Dist. LEXIS 132438 (W.D. Okla. Aug. 7, 2019)]. The court initially observed that in considering the constitutionality of a statute, the legislative act was presumed to be constitutional and would be up upheld unless it was "clearly, palpably and plainly inconsistent with the Constitution," the court cast aside the plaintiff's contention that subrogation in the workers' compensation context had long been viewed with skepticism. It also indicated the bulk of the plaintiff's argument was supported only by the state's Supreme Court dicta statements; similar challenges in other states had proved unsuccessful.

Background

Atkins was involved in a fatal motor vehicle accident while in the course of his employment. His surviving spouse (“the plaintiff”) filed a workers’ compensation death benefits claim and the Oklahoma Workers’ Compensation Commission entered an order awarding death benefits to the plaintiff and to her son. Under the statute, plaintiff received a lump sum of $100,000, plus weekly benefits to continue for as long as she met the statutory eligibility requirements, together with funeral expenses. The Commission awarded Atkins’ son a $25,000 lump sum and weekly benefits as well.

Civil Action Filed

Plaintiff filed a civil action against two companies (“the defendants”), alleging negligence and gross negligence and seeking wrongful death and punitive damages. The defendants removed the case to federal court and then reached a confidential settlement with the plaintiff. At that point, the employer’s workers’ compensation insurance carrier, GMIC, moved to intervene. It asserted a statutory right of recovery against the defendants, a right of reimbursement against the plaintiff, and/or equitable subrogation and indemnity rights. The court allowed GMIC to intervene and the plaintiff then moved for summary judgment, contending that the statute providing for any subrogation rights favoring GMIC was unconstitutional.

Article 23, Section 7

Article 23, Section 7 of the Oklahoma Constitution provides in relevant part:

The right of action to recover damages for injuries resulting in death shall never be abrogated, and the amount recoverable shall not be subject to any statutory limitation, provided however, that the Legislature may provide an amount of compensation under the Workers' Compensation Law for death resulting from injuries suffered in employment covered by such law, in which case the compensation so provided shall be exclusive, and the Legislature may enact statutory limits on the amount recoverable in civil actions or claims against the state or any of its political subdivisions.

The Subrogation Statute

85A Okla. Stat. § 43 provides in relevant part preserves the right of an injured worker or his/her dependents to make a claim or maintain an action against any third party. As with virtually all subrogation statutes, the section provides that the employer who has paid workers’ compensation may join in the action and is further entitled to specific proportionate recovery from any third party settlement or judgment.

The Updike Decision

The federal district court indicated that the plaintiff had principally relied on Updike Advertising Sys. v. State Industrial Commission, 1955 OK 19, 282 P.2d 759, a decision which held that the right of subrogation against a third-party tortfeasor never existed in favor of an employer or workers’ compensation carrier at common law. The issue was essentially reversed in Updike. There, the employer and workers’ compensation carrier had challenged a statutory provision that said no subrogation was allowed for death claims. The Updike court found that limiting statute did not violate the Oklahoma constitution.

The Updike Dictum

Near the end of the Updike opinion, the court offered the following:

So, if subrogation had been provided by the Legislature such provision would have to be declared unconstitutional because in conflict with the provision of the constitution which yet inhibits limitation of recovery for wrongful death [282 P.2d at 764-65].

Subsequent decisions picked up on that language. For example, in Lee Way Motor Freight, Inc. v. Yellow Transit Freight Lines, Inc., 251 F.2d 97, 101 (10th Cir. 1957), the Court stated:

Moreover, we think that what was said in the Updike case and the cases following it, makes it quite clear that in Oklahoma, an employer or its insurance carrier cannot recover the death benefits from a negligent third person.

In McBride v. Grand Island Exp., Inc., 2010 OK 93, ¶ 12, 246 P.3d 718, 721-22, the Supreme Court of Oklahoma said:

Section 44(b) however has no right of subrogation to recover money from third persons paid by the employer or his insurance carrier for death claims or death benefits under the Workers' Compensation Act. The employer or the insurance carrier had no historical right by payment of workers’ compensation death benefits to pursue the tortfeasor to recover the workers’ compensation death benefits paid because the right to death benefits subrogation was not authorized and was viewed as in conflict with Oklahoma Constitution, Article 23 § 7.

Issue Was Different in Prior Cases: “Double Dicta”

The federal district court stressed that the cases cited by plaintiff in the instant case had involved employers or their insurance carriers challenging state statutory prohibitions on subrogation for death benefits or seeking to assert equitable or common-law subrogation or reimbursement rights where none existed. The federal court added that given their factual circumstances, procedural postures, and contested legal issues, the cases cited by the plaintiff were inapposite here; the language relied upon in Updike was dicta. The court continued:

Indeed, Updike’s language, the wellspring of Plaintiff’s arguments about 85A O.S. § 43’s constitutionality, is dicta twice over: not only are the Oklahoma Supreme Court's musings about the constitutionality of some theoretical statutory subrogation right inessential to its holding, but all the language outside the court's syllabus is non-binding given the opinion's date.

No Case Law Directly on Point

The federal court added that, like the parties, it had not been able to find any Oklahoma case law directly on point. It did note two decisions from other jurisdictions: Stout v. State Compensation Fund, 197 Ariz. 238, 3 P.3d 1158 (Ariz. Ct. App. 2000) and Anderson v. United Parcel Service, 2004 UT 57, 96 P.3d 903 (Utah 2004). In both cases, the courts held that somewhat similar state constitutional provisions did not render unconstitutional the compensation carrier’s statutory lien interest in a recovery against a third-party tortfeasor.

§ 43 Merely Allocates

The federal court concluded that 85A O.S. § 43(A) did not limit the “amount recoverable” in a wrongful death action; rather, it was merely an allocative measure, specifying how and to whom the settlement proceeds were distributed. Lacking on-point Oklahoma authority, but persuaded by out-of-state decisions resolving legal issues like those at issue here, the Court found that the plaintiff had not established that 85A O.S. § 43 was clearly, palpably, and plainly inconsistent with Article 23, Section 7 of the Oklahoma Constitution. Plaintiff’s motion for summary judgment was accordingly denied.