W.C. No. 4-449-133Industrial Claim Appeals Office.
May 1, 2002
ORDER OF REMAND
The respondents seek review of an order of Administrative Law Judge Wheelock (ALJ) which ordered them to pay attorney fees for a discovery violation. The respondents argue they did not violate any discovery order, that the motion for attorney fees was not timely filed, and that the amount of fees was unjustified. We remand the matter for entry of a new order.
On December 5, 2000, claimant’s counsel mailed a letter and “Request for Production” to respondents’ counsel. These documents requested the respondents to produce a “payout log” documenting the payment of medical expenses shown on a final admission of liability. Apparently, no payout log was produced, and on January 22, and January 25, 2001, claimant’s counsel attempted to contact counsel for respondents, but to no avail.
On February 19, 2001, counsel for the claimant filed a Motion to Compel production of the payout log and requesting expenses and attorney fees incurred in filing the motion. No response was filed, and on March 6, 2001, PALJ Klein entered an order requiring the respondents to produce the payout log, and requiring the respondents to pay expenses and attorney fees incurred in filing the motion to compel. On April 5, 2001, claimant’s counsel mailed a letter to respondents’ counsel indicating the claimant had not yet received the payout log as ordered by PALJ Klein.
On May 17, 2001, claimant’s counsel file a verified motion for an award of attorney fees pursuant to PALJ Klein’s March 6 order. The motion requested $234 in attorney fees for time spent between January 22, 2001, and April 4, 2001, when claimant’s counsel prepared the April 5 letter. A response was then filed arguing the PALJ had no authority to award attorney fees because there was no violation of a discovery order, the request for attorney fees was not timely filed, and the requested fees were not justified.
Following a hearing, the ALJ entered an order on December 19, 2001, requiring the respondents to pay $234 in attorney fees. Citing CRCP 37 (a) (4), the ALJ found the claimant made a “good-faith effort” to obtain discovery prior to filing the motion to compel. The ALJ further found the respondents did not file any response to the motion to compel discovery, nor had they complied with PALJ Klein’s order by April 5, 2001. Thus, the ALJ concluded that, “in view of the number documented [sic] attempts to obtain the requested payment log, that respondents’ failure to provide it was willful.” The ALJ also “adopted” PALJ Klein’s order.
I.
On review, the claimant contends the ALJ’s December 19 order is not final and reviewable because it involves discovery sanctions. We disagree.
Section 8-43-301(2), C.R.S. 2001, provides a party may file a petition to review “an order which requires any party to pay a penalty or benefits.” The question presented is whether an order requiring the payment of attorney fees for violation of a discovery order constitutes a “penalty” which renders the order final and reviewable.
It is true, as the claimant points out, that in Reed v. Industrial Claim Appeals Office, 13 P.3d 810 (Colo.App. 2000), the court held an ALJ’s order denying the imposition of nonmonetary discovery sanctions was not final and reviewable because the order did not “require the payment of a sum of money for violation of an order or refusal to perform a duty.” Id. at 813. Similarly, an order which conditioned the taking of out-of-state depositions on the respondents’ willingness to pay expenses incurred by the claimant’s attorney in taking the depositions was not final and reviewable because it did not “mandate the payment of a sum of money for violation” of the order, nor did it require the insurer to pay any money. American Express v. Industrial Commission, 712 P.2d 1132, 1134 (Colo.App. 1985).
However, in BCW Enterprises, Ltd. v. Industrial Claim Appeals Office, 964 P.2d 533 (Colo.App. 1997), the court defined the term “penalty” as including “statutory sanctions imposed on a party for the failure to obey orders of the Panel or adhere to mandatory procedural requirements.” Thus, the court concluded that a request for attorney fees pursuant to § 8-43-211(1)(d), C.R.S. 2001, could be viewed as requesting assessment of a “penalty.” Moreover, in Reed v. Industrial Claim Appeals Office, supra, the court reviewed an ALJ’s order denying the claimant’s request for the imposition of attorney fees and costs pursuant to CRCP 37. Implicit in the court’s review of the order was the conclusion the order constituted a denial of the claimant’s request for a “penalty.” Therefore, denial of the request was reviewable for purposes of §8-43-301(2).
Here, the ALJ’s order imposes a monetary sanction of attorney fees on the respondents for their alleged failure to provide discovery. Further, the order explicitly requires the respondents to make payment. Consequently, we conclude the order imposes a “penalty” on the respondents and is immediately reviewable under 8-43-301 (2). Reed v. Industrial Claim Appeals Office, supra.
II.
The respondents contend the ALJ erred in assessing attorney fees because they did not violate any discovery order. The respondents argue PALJ Klein’s order was the first order or legal requirement for the production of documents; nevertheless, PALJ Klein imposed the sanction of attorney fees for violating the order. Under these circumstances, the respondents reason their actions were not “willful” for purposes of § 8-43-207(1)(e), C.R.S. 2001. We conclude the matter must be remanded for entry of a new order.
Initially, we disagree with the claimant that the respondents’ failure to reply to the motion to compel constituted a “waiver” of their right to dispute the order before the ALJ. Because PALJ orders may be contested before the ALJ at a full evidentiary hearing, the doctrine of waiver is not apposite. See Orth v. Industrial Claim Appeals Office, 965 P.2d 1246, 1254 (Colo. 1998) (propriety of PALJ’s order may be addressed at subsequent hearing before ALJ).
Section 8-43-207(1)(e) provides ALJ’s are empowered to rule on discovery matters and impose sanctions as follows:
Upon written motion and for good cause shown, permit parties to engage in discovery; except that permission need not be sought if each party is represented by an attorney and the parties agree to engage in discovery. The director or administrative law judge may rule on discovery matters and impose the sanctions provided in the rules of civil procedure in the district courts for willful failure to comply with permitted discovery. (Emphasis added).
Thus, prior to imposing any sanctions, an ALJ must determine that discovery was “permitted” by the agreement of represented parties or by operation of law, and that failure to provide discovery was “willful.” Conduct is willful if it is “intentional or deliberate or if the party’s conduct manifests either a flagrant disregard of discovery obligations or constitutes a substantial deviation from reasonable care in complying with discovery obligations.” Sheid v. Hewlett Packard, 826 P.2d 396, 399
(Colo.App. 1991).
Here, the ALJ did not find that, prior to PALJ Klein’s order, there was any “agreement” between respondents’ counsel and claimant’s counsel to produce the payment log. Indeed, the record suggests the first personal contact between claimant’s counsel and respondents’ counsel occurred on February 14, 2001, in a telephone conversation. However, the content of that telephone conversation is undisclosed in the record. (Claimant’s Verified Motion for Award of Attorney’s Fees p. 1).
Neither does the record demonstrate the claimant’s request for production of documents was a permitted form of discovery under the Rules of Procedure. The record contains no evidence that, prior to PALJ Klein’s order, there was ever any request for an ALJ to authorize production of documents as required by § 8-43-207 (1)(e). Neither is there any indication the claimant requested a PALJ to issue a subpoena for the production of documents or an order permitting discovery under § 8-43-207.5(2), C.R.S. 2001.
Further, the Rules of Procedure existing at the time of the claimants’ motion to compel do not treat requests for production of documents as a form of “permitted discovery.” Former Rule of Procedure VIII (E) (1), 7 Code Colo. Reg. 1101-3, provided that discovery in workers’ compensation cases was limited to “one set of written interrogatories,” and contained no provision for the production of documents. (Rule of Procedure VIII (E) (1) (a) was recently amended to provide for “one set of written interrogatories and requests for production of documents”). However, former Rule of Procedure VIII (E) (6), 7 Code Colo. Reg. 1101-3, permitted ALJ’s to “allow additional discovery” for good cause shown.
It follows that PALJ Klein’s order was improper insofar as it imposed attorney fees for failure to make discovery. Prior to issuance of that order, there was no agreement of the parties or legal requirement for the respondents to produce the payment log. Indeed, the claimant failed to take any steps to obtain official approval of the request for production of documents. Thus, the requested payment log was not a form of “permitted discovery” for purposes of § 8-43-207(1)(e). Also, the respondents were not legally required to produce the documents; therefore, their failure to do so prior to March 6, 2001, could not be considered “willful” because their inaction did not demonstrate a deliberate, flagrant, or substantial deviation from any discover obligation. Section 8-43-207(1)(e); Sheid v. Hewlett Packard, supra.
It was the order of the ALJ which ultimately imposed attorney fees on the respondents. Arguably, the ALJ’s order was based, at least in part, on a finding the respondents violated PALJ Klein’s order to make discovery. However, the ALJ’s order “adopts” PALJ Klein’s order, and the ALJ implicitly relied on PALJ Klein’s order in determining that the failure to provide the payment log was “willful.” (Findings of Fact 11, 13; Order, p. 3, “ALJ adopts the order of PALJ Klein”). Consequently, the ALJ’s order is partially based on the assumption the respondents engaged in conduct (prior to PALJ Klein’s order) which evidenced a disregard of their discovery obligations when, in fact, no such obligation existed. Thus, the ALJ’s reliance on PALJ Klein’s order taints the conclusion that the respondents’ “willfully” violated PALJ Klein’s order.
Under the circumstances, the matter must be remanded for further proceedings to determine whether or not the respondents violated the order to produce documents which PALJ Klein issued on March 6, 2001. The ALJ may, in his or her discretion, conduct an additional hearing to resolve this issue. The parties should be permitted to make argument to the ALJ, oral or written, concerning whether or not an additional hearing is necessary to ensure due process and fully develop the record.
In reaching this result, we are unpersuaded by the respondents’ argument that the claimant’s request for attorney fees was untimely under former Rule of Procedure VIII (M), 7 Code Colo. Reg. 1101-3. In our view, PALJ Klein’s order was not a “final” order for purposes of rule VIII (M) because it was subject to review by an ALJ, and because PALJ Klein did not determine the amount of attorney fees to be awarded. Section 8-43-207.5(3), C.R.S. 2001 (orders of PALJ’s are interlocutory). We need not consider the respondents’ remaining arguments.
IT IS THEREFORE ORDERED the ALJ’s order dated December 19, 2001, is set aside, and the matter is remanded for further proceedings consistent with the views expressed herein.
INDUSTRIAL CLAIM APPEALS PANEL
___________________________________ David Cain
___________________________________ Kathy E. Dean
Copies of this decision were mailed May 1, 2002 to the following parties:
Julie Thompson, 2234 Bison Dr., Colorado Springs, CO 80911
Sears, Denver Cherry Creek, 2375 E. 1st Ave., Denver, CO 80206-5601
Latrice Hayes, Adjuster, Liberty Mutual Group, P. O. Box 168208, Irving, TX 75016-8205
Renee C. Ozer, Esq., 25 N. Cascade Ave., #215, Colorado Springs, CO 80903 (For Claimant)
David G. Kroll, Esq., 1120 Lincoln St., #1606, Denver, CO 80203 (For Respondents)
By: A. Hurtado