Missouri Supreme Court hears tort victims fund dispute

The Missouri Supreme Court heard arguments March 10 in a case over sovereign immunity and how payments from the state’s tort victims’ compensation fund should be calculated.

The appeal stems from lawsuits filed by two groups of claimants challenging how the Division of Workers’ Compensation calculated prorated payments for awards issued in 2022. At issue is whether the division must base those calculations on the total amount of money held in the fund or on the amount appropriated by the legislature for that fiscal year.

Missouri’s tort victims’ compensation fund is outlined in Chapter 537 and administered by the Division of Workers’ Compensation. Money from a portion of punitive damages awarded in civil lawsuits in Missouri is deposited into the fund and kept separate from general revenue. Of the money deposited into the fund, 26 percent goes to the basic civil legal services fund, while the remaining 74 percent is used to compensate individuals injured by others’ negligence who were unable to fully collect their judgments.

Each claim may be awarded up to $300,000 by the division; however, actual payments depend on the funds available. Under the statute, the division must determine the total amount of awards for claims filed during the annual claims period by June 30 of each year and calculate payments accordingly. If the total value of awards exceeds the available funds, the division must prorate the payments. The statute also provides that payments cannot be made until funds have accumulated and have been appropriated.

In 2023, two groups of plaintiffs filed lawsuits challenging the division’s calculation of payments for the 2022 awards. They sued the state’s Labor and Industrial Relations Commission, its chair and another member, as well as the Department of Labor and Industrial Relations and its director and the Division of Workers’ Compensation and its director.

The plaintiffs argued the division unlawfully based its prorated calculation on the amount appropriated rather than the total money in the fund and that the payments issued were not full and final. They also sought an injunction barring future payments from the fund until they were paid under their proposed calculation method.

Cole County Circuit Court ultimately ruled in the state’s favor, finding the claims barred by sovereign immunity and failure to exhaust administrative remedies. The court also deferred to the division’s interpretation of the statute and concluded the division appropriately calculated prorated payments based on the amount appropriated rather than the amount in the fund.

Both sets of claimants were represented during arguments by James R. Layton of Tueth Keeney Cooper Mohan & Jackstadt in St. Louis; the state was represented by William J. Seidleck of the attorney general’s office in St. Louis.

Layton told the judges the dispute ultimately comes down to how the statute governing the fund should be interpreted.

“The correct thing, from our view, is that section 537.684 is self-contained,” Layton said. “When it says total amount of money in the fund, it means total amount of money in the fund.”

Layton argued the division’s interpretation improperly reads additional language into the statute by tying the calculation to legislative appropriations.

“It does not mean some other amount that on whatever day it is the division decides to do this calculation is the amount that has been appropriated by the general assembly,” he said.

Chief Justice W. Brent Powell questioned Layton about sovereign immunity and how statutes allowing agencies to “sue and be sued” interact with other statutory provisions.

“Is there any case law where there’s the sue and be sued language, but then maybe the statutory basis for the cause of action includes also an immunity type provision,” Powell said.

Layton said he was unaware of a case involving that exact combination of provisions but argued that the plaintiffs’ lawsuit fits within a well-established category of cases seeking judicial interpretation of a statute.

“We’re not asking that an appropriation be compelled,” Layton said. “We’re simply asking that the court do what the court has done in many cases … which is to declare the law through a declaratory judgment action.”

Seidleck told the court the lawsuit is fundamentally a claim for money from a state-created fund and therefore barred by sovereign immunity.

“If sovereign immunity has any cachet, plainly bars this case,” Seidleck said. “Plaintiffs here take the extraordinary step of demanding monetary recovery against a state created discretionary compensation fund.”

He argued that allowing the lawsuit to proceed would undermine the principle that waivers of sovereign immunity must be narrowly construed.

“Holding that pro forma sue-and-be-sued clauses broadly waive sovereign immunity against money judgments for every program they administer would blow a gaping hole into the general rule that courts narrowly construe waivers of sovereign immunity,” he said.

Powell questioned how courts could review the division’s interpretation of the statute if sovereign immunity barred a declaratory judgment action.

“How is it that the courts could ever get involved … then determine whether or not the division’s interpretation of the statute is correct,” said Powell.

Seidleck said the issue could be addressed through the administrative review process outlined in statute.

“If placed through the administrative review process and then went to the regional court of appeals, that’s certainly when a court could issue an interpretation,” he said.

Judge Kelly C. Broniec then pressed Seidleck on how that process would work in practice. She noted that claimants must file claims with the fund within two years after their underlying judgment becomes final but may not learn the amount of a prorated payment until months after their award is issued.

“Is that decision made within the time frame that’s required to file for the administrative review though,” Broniec said.

Seidleck said he was not aware whether the proration decision is issued within that timeframe.

“So how would they know they need to file that,” Broniec said.

During rebuttal, Layton said the parties ultimately disagree about how the statute governing the fund should be applied once a claim becomes final.

“Once their claim became final … there is a specific sum of money,” Layton said. “We just disagree about what it is.”

The case is Louise Jones, et al. v. Missouri Labor and Industrial Relations Commission, et al., Case No. SC101256.