Merrill v. Labor Commission

2009 UT 74
This opinion is subject to revision before final
publication in the Pacific Reporter.
IN THE SUPREME COURT OF THE STATE OF UTAH
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Nathan H. Merrill, 	No. 20070584
Petitioner,
v.
Utah Labor Commission; Vermax
of Florida, Inc., dba Dakota
Cabinets; Workers Compensation 	F I L E D
Fund; and Wausau Business Insurance,
Respondents. 	December 4, 2009
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Original proceeding in the Utah Court of Appeals
Attorneys: 	Phillip B. Shell, Salt Lake City, for petitioner
Sharon J. Eblen, Salt Lake City, for respondents
Alan Hennebold, Salt Lake City, for Labor Commission
James R. Black, Thomas R. Lee, Eugene C. Miller,
Salt Lake City, for amicus Workers Compensation Fund
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On Petition for Rehearing**
DURHAM, Chief Justice:
INTRODUCTION
¶1 	Respondent, Wausau Business Insurance, petitioned for
rehearing regarding the retroactive application of our ruling in
Merrill v. Utah Labor Commission, 2009 UT 26, __ P.3d __. 	In
Merrill, we held that the offset of Utah Code section 34A-2-
413(5) was a constitutional violation. 	Id. ¶ 1. 	Respondent
contends that we should, in our equitable discretion, limit the
retroactive operation of our ruling.
BACKGROUND
¶2 	Because a complete recitation of the facts is found in
Merrill v. Utah Labor Commission, we list only those facts
_________________________________________________________________
** See Merrill v. Utah Labor Comm’n, 2009 UT 26, __ P.3d __.

No. 20070584 	2
relevant to this rehearing. 	See 2009 UT 26, ¶¶ 2-4, __ P.3d __.
In Merrill, Petitioner, Nathan H. Merrill, challenged Utah Code
section 34A-2-413(5) as a violation of “the Equal Protection
Clauses of the Utah and United States Constitutions by
discriminating on the basis of age.” 	Id. ¶ 1. 	Section 34A-2-
413(5) reduced workers’ compensation benefits of individuals
receiving both workers’ compensation benefits and social security
retirement benefits by fifty percent of the amount of their
social security retirement benefits. 	Id. 	On rational basis
review, we agreed with Mr. Merrill and held that this offset
violated the uniform operation of laws provision of the Utah
Constitution. 	Id. ¶¶ 1, 8, 38. 	The court published its opinion
in Merrill on April 24, 2009.
¶3 	Following publication and pursuant to Utah Rule of
Appellate Procedure 35, Respondent, joined by Amicus Curiae,
Workers Compensation Fund, timely filed a petition for rehearing
regarding the retroactive application of our ruling in Merrill.
We granted the petition.
ANALYSIS
¶4 	On rehearing, Respondent argues that our ruling in
Merrill should only be given prospective effect in light of the
insurance industry’s reliance on the offset and the burdens that
would be imposed by retroactive operation. 	We look first to the
question of whether we should exercise our equitable discretion
in limiting the retroactive operation of our ruling in Merrill.
Because we conclude that some limitation is warranted, we then
address the limited retroactive operation of our ruling.
I. 	IN BALANCING THE EQUITIES PRESENTED, WE LIMIT
THE RETROACTIVE OPERATION OF OUR RULING
¶5 	“The general rule from time immemorial is that the
ruling of a court is deemed to state the true nature of the law
both retrospectively and prospectively.” 	Malan v. Lewis, 693
P.2d 661, 676 (Utah 1984). 	In civil cases, however, the court
may, in its equitable discretion, prohibit or limit retroactive
operation of its ruling “where the overruled law has been
justifiably relied upon or where retroactive operation creates a
burden.” 	Id. (internal quotation marks omitted). 	While these
interests weigh heavily, this court does not ignore the
underlying considerations that led to the correction of law. 	See
Rio Algom Corp. v. San Juan County, 681 P.2d 184, 196 (Utah
1984). 	Nor does the court cast aside the efforts of successful
litigants and deprive them of “the fruits of their victory,” as
doing so would “discourage challenges to statutes of questionable

3 	No. 20070584
validity.” 	Id. 	Therefore, “[i]n fashioning an equitable remedy,
. . . the court should seek a blend of what is necessary, what is
fair, and what is workable.” 	Id.
¶6 	A few of our cases have merited purely prospective
application. 	For example, in Loyal Order of Moose v. County
Board of Equalization, the court gave pure prospective effect to
its decision. 	657 P.2d 265 (Utah 1982). 	Specifically, the court
“harbor[ed] concern for the harsh effect” that its interpretation
of a tax exemption would have on nonprofit entities that had
relied upon the court’s previous interpretation “for so many
years,” and because retroactivity might result in an unreasonable
burden of back taxes. 	Id. at 264-65. 	In Rio Algom Corp., the
court limited its ruling to prospective application, with the
exception of the prevailing litigants. 	681 P.2d at 196. 	In
doing so, the court cited to local governments’ reliance on the
validity of a tax in light of “strained budgets” and the risk to
their solvency. 	Id. at 195. 	We cited to the “great financial
and administrative hardship” that would be imposed by retroactive
effect where numerous past payments had been made under protest
and would need to be reopened. 	Id. at 195-96.
¶7 	Respondent compares the effect of our ruling in Merrill
to that of Loyal Order and Rio Algom. 	Specifically, Respondent
argues that it, as well as the workers’ compensation insurance
industry, justifiably relied on the presumptive constitutionality
of the offset in section 34A-2-413(5) in establishing premiums
and an insurance structure. 	It had done so since 1988, when the
Utah Legislature enacted the statute. 	Moreover, Respondent
argues that because the offset could only be, and in fact was,
challenged on rational basis review, this generally deferential
standard of review did not signal a likelihood of constitutional
infirmity. 	Respondent emphasizes that although we ruled the
offset to be unconstitutional, we did note in Merrill that other
states have upheld such an offset. 	2009 UT 26, ¶ 35.
¶8 	Further, Respondent points out that retroactive
application would impose significant financial, administrative,
and competitive burdens. 	While prospective application of the
court’s ruling can be resolved by an adjustment in workers
compensation rates, premiums, and a premium tax, no such solution
will be possible for retroactive application. 	Instead, the cost
of retroactive payments would be shifted from past employers to
current employers. 	Also, an insurance company or a self-insured
employer would be forced to make payments from its equity, which
could lead to a ratings downgrade, insolvency, regulatory
oversight, or potential liquidation. 	Administratively,
retroactive application would open up many workers compensation

No. 20070584 	4
claims that have been settled and resolved. 	Respondent asserts
that these adverse consequences would make Utah an undesirable
market for insurance companies.
¶9 	Mr. Merrill agrees that the issue before the court is
one of equity. 	He asserts that while a negative financial impact
will occur, its scope is not as far reaching as Respondent
suggests. 	He calculates that retroactive application applied to
past payments will total less than $15 million industrywide.
While this is a significant amount, it appears manageable when
compared to the more than $320 million in dividends distributed
since 1990 to the policyholders of Utah’s largest workers’
compensation insurance carrier, the Workers Compensation Fund.
¶10 	Moreover, unlike Loyal Order and Rio Algom, the
underlying scheme at issue in Merrill relates not to taxes, but
to workers compensation. 	The Workers Compensation Act is
designed to help injured workers. 	The system of compromises that
comprises workers compensation as a whole mandates exclusivity;
both workers and employers give up the right to litigate. 	At the
heart of this scheme lies a balance of interests predicated on
fairness. 	Despite this goal, our decision means that the
statutory offset has for nearly two decades unconstitutionally
deprived workers of monies rightfully owed to them.
¶11 	Nonetheless, the question of retroactivity is tied to
fundamental fairness and equity across the board. 	In balancing
the equities before us, we recognize that a justified reliance on
the constitutionality of the statute existed and that full
retroactive application of our ruling would create significant
burdens. 	Yet we remain mindful of the underlying workers
compensation scheme and the constitutional violation. 	Therefore,
although we decline to give purely prospective application, we
limit, to an extent, the retroactive operation of our ruling in
Merrill.
II. 	LIMITED RETROACTIVE OPERATION OF
MERRILL V. UTAH LABOR COMMISSION
¶12 	In helping identify the effect of retroactivity,
Respondent has presented several useful categories, on which we
rely in narrowing the application of our Merrill ruling:
(1) payments to injured workers made after publication of the
April 24, 2009, decision (future payments); (2) payments made
before publication (past payments); and (3) inactive and/or
unspecified payments to claimants (inactive/unspecified
payments).

5 	No. 20070584
¶13 	Before examining each of these categories, we direct
that our ruling be given full retroactive effect as it pertains
to Mr. Merrill. 	He is entitled to compensation for his pursuit
of this constitutional challenge.
A. 	Prospective Application Applies to All Future Payments
¶14 	For any future payments, as defined above, regardless
of the date of injury, our ruling applies. 	At oral argument
counsel informed the court that the Employers Reinsurance Fund
has corrected its practice and is already making future payments
in accordance with our ruling. 	It was represented to us,
however, that the Workers Compensation Fund has, at least in some
instances, continued the practice we held unconstitutional in
Merrill. 	Instead of disregarding the unconstitutional offset,
the Workers Compensation Fund is apparently still including the
offset in calculating and making future payments to the affected
class of injured workers. 	It defends this practice in reducing
these future payments by reference to the date of the worker’s
injury, rather than by reference to the date of Merrill’s
publication. 	This practice misunderstands prospective operation.
No one may take offsets for payments made after the date of our
ruling. 	If an ongoing stream of future payments exists from and
after April 24, 2009, our ruling applies to them.
B. 	Retroactive Operation Applies to All Seeking Past Payments
Except for Those Who Settled Their Claims
¶15 	In contrast, retroactive operation of Merrill to past
payments requires us to draw a fine line, looking to the concepts
of waiver and finality.
¶16 	Respondent directs us to Nebeker v. Utah State Tax
Commission, 2001 UT 74, 34 P.3d 180. 	There, we discussed a
petitioner’s failure to raise a constitutional argument before
the tax commission. 	Id. ¶¶ 15-24. 	We noted that despite the tax
commission’s lack of jurisdiction to determine the
constitutionality of legislation, the petitioner’s failure to
raise the constitutional argument constituted a waiver. 	Id. ¶ 24
n.5. 	We have since narrowed this concept of waiver of a
constitutional argument before state agencies. 	See ABCO Enters.
v. Utah State Tax Comm’n, 2009 UT 36, ¶¶ 8-12, 211 P.3d 382
(holding that where the “sole issue on appeal is a facial
constitutional challenge to a tax statute, we may address that
challenge on appeal even if it has not been explicitly raised
before the administrative agency”). 	Nonetheless, the
considerations underlying waiver have relevance as we exercise
our discretion in this case.

No. 20070584 	6
¶17 	Furthermore, there is a justified need for “finality in
administrative decisions.” 	Nebeker, 2001 UT 74, ¶ 23 (internal
quotation marks omitted). 	While the Labor Commission has
continuing jurisdiction pursuant to Utah Code section 34A-2-420,
it lacks the authority to reopen workers compensation proceedings
to consider legal arguments not previously made. 	See Utah Code
Ann. § 34A-2-420 (2005); see also Spencer v. Indus. Comm’n, 290
P.2d 692, 694 (Utah 1955) (noting that party cannot “file a new
application and have the Commission redetermine his cause on
identical facts” because he is dissatisfied with the former
order). 	Also, we have noted that a judgment “based upon an
erroneous view of the law is not open to collateral attack, but
can be corrected by a direct review and not by bringing another
action upon the same cause [of action].” 	Collins v. Sandy City
Bd. of Adjustment, 2002 UT 77, ¶ 18, 52 P.3d 1267 (alteration in
original).
¶18 	Arguing from the above principles, Respondent would
have us draw the line on retroactivity to preclude application of
Merrill to all cases that resulted in an administrative order in
the Labor Commission, including both adjudicated cases and cases
resulting in a settlement approved by order of an administrative
law judge. 	While we agree to an extent, we believe that waiver
and finality are most applicable to settled cases. 	Settlements,
we believe, should not be upset, even because of a change in the
law; the process of compromise they represent is too multifaceted
and context-driven to permit unwinding. 	The parties to a
settlement each bear the risk of a subsequent change in or
clarification of the law--a risk that could cut either way.
¶19 	Accordingly, for claimants who actively negotiated and
settled their claims, and thus chose not to challenge the offset,
our ruling will have no retroactive effect. 	But if a claimant’s
mere acquiescence or challenges on other grounds, constitutional
or not, resulted in an administrative order, then our ruling will
apply retroactively and allow recoupment regarding past payments
from their inception.
C. 	Retroactive Operation Does Not Apply for
Inactive or Unspecified Payments
¶20 	Finally, we turn to the third category of
inactive/unspecified payments. 	This category involves those
claimants who are now deceased, who settled their claims for
payment of a lump sum, or who disputed claims but settled without
obtaining an express designation of permanent total disability.
Again invoking the concepts of waiver and finality, we conclude

7 	No. 20070584
that the claimants in this category have, for whatever reason,
foregone the ability to recoup payments. 	We therefore prohibit
retroactive application of our ruling to this category of
individuals.
CONCLUSION
¶21 	Although we concede that the workers compensation
industry justifiably relied on the offset contained in Utah Code
section 34A-2-413(5) and that significant financial and
administrative burdens would be imposed if our ruling in Merrill
v. Utah Labor Commission, 2009 UT 26, __ P.3d __, were given full
retroactive effect, we are also persuaded by the equities
inherent in the workers compensation scheme. 	We therefore direct
that our ruling be given limited retroactive operation consistent
with this opinion.
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¶22 	Associate Chief Justice Durrant, Justice Wilkins, and
Justice Parrish concur in Chief Justice Durham’s opinion.
¶23 	Justice Nehring does not participate herein.