The Ohio Bureau of Workers' Compensation did not violate an employer's due process rights when it issued millions of dollars in workers comp liens against the company, the 6th U.S. Circuit Court of Appeals in Cincinnati has ruled.
Ryan Mason owned I-Force L.L.C., a temporary staffing company that lost workers comp coverage under the Ohio workers comp bureau's rating plan, records show. I-Force applied for self-insurance status, but the workers comp bureau denied the company's request, leaving I-Force owing more than $3 million in unpaid workers comp premiums.
Daily Services L.L.C., another temporary staffing firm owned by Mr. Mason, acquired some of I-Force's customers, records show. The Ohio workers comp bureau in 2009 deemed Daily Services to be a successor to I-Force and issued several workers comp liens and judgments against Daily Services. Those included a $54 million judgment and lien in November 2009 and a $3 million judgment and lien in July 2010, records show.
Daily Services filed a motion in an Ohio court to vacate the workers comp bureau judgments in September 2010, records show. The state court vacated the $3 million judgment and the $54 million judgment because it ruled the bureau did not provide prior notice to Daily Services, as is required under Ohio law.
Records show that the bureau dropped its earlier judgments against Daily Services in February 2011, but filed another $3 million lien and judgment against the company 10 days later based on an assessment notice that had been sent earlier.
An Ohio court vacated the second $3 million judgment because the assessment was not final, based on the fact that Daily Services had filed an administrative appeal against the judgment, records show. However, the bureau has not released that lien.
Lawsuit filed against comp bureau employees
Daily Services subsequently sued several workers comp bureau employees in U.S. District Court in Columbus, Ohio, arguing that they violated the company's 14th Amendment right to due process when the bureau issued each judgment and lien, records show. The company argued that the bureau's claims prevented Daily Services from securing financing, which caused the firm to incur excess interest and hindered its ability to expand.
Daily Services also alleged in court filings that one of the workers comp bureau defendants was a close friend of the owner of a Daily Services competitor and was trying to shut down Daily Services, records show.
The U.S. District Court ruled in favor of the workers comp bureau employees, saying the law did not establish whether Daily Services had a right to a notice of its liens and an opportunity to be heard over the issue, records show. Daily Services appealed.
In a 2-1 ruling Thursday, a three-judge panel of the 6th District ruled in favor of the workers comp bureau employees. The majority opinion noted that the bureau employees “would know that predeprivation process — notice and an opportunity to be heard — was required before filing the judgments and liens against Daily Services.”
Postdeprivation remedies ruled adequate
However, the majority found that Daily Services' due process was not violated because the company had adequate “postdeprivation remedies” — such as the ability to be heard in state court and have wrongful liens and judgments vacated — that countered any mistakes in issuing notices prior to a judgment. Such remedies are allowed in the face of “unpredictable” and “random” liens that were filed by defendants in the case, the majority said.
“The Bureau erroneously filed two judgments and two liens without notice, erroneously filed one judgment and one lien before Daily Services' administrative appeal was resolved, and voluntarily released one judgment and two liens. It would be difficult for the state to predict precisely when these varied, intentional violations of state law would occur,” the majority said of why it would have been difficult for the Ohio workers comp bureau to offer prior notice of Daily Services' liens.
In a partial dissent, Justice Karen Nelson Moore said she agreed with the majority's analysis of prior case law. However, she said she believed that the Ohio workers comp bureau employees still failed to provide Daily Services its due process.
“The fact that the defendants failed to follow the state-mandated procedures does not mean that they were not legally empowered to effect those deprivations,” said Judge Moore, who added that she would have allowed Daily Services to proceed with its due process denial claim.