The city of Cleveland will have to pursue its claim that it was overcharged $4.5 million by the Ohio Bureau of Workers Compensation through the Ohio Court of Claims after the state’s high court ordered dismissal of its case.

In Cleveland v. Ohio Bureau of Workers Compensation, the Supreme Court of Ohio in a 6-1 decision Wednesday vacated an award of unpaid premiums to Cleveland and remanded the case to the Cuyahoga County Court of Common Pleas with an order of dismissal.

In 2013, Cleveland filed a lawsuit against the BWC, claiming that the BWC undercharged group-rated employers and overcharged individually rated employers, such as the city of Cleveland.

Ohio requires public employers who are not self-insured to contribute to the public insurance fund, which is then used to pay for work-related accidents. The BWC is required by law to return premiums in excess of its required surplus to participating employers. In 1989, the BWC developed group-rated plans to allow employers to pool their collective risk to obtain better premiums. Employers who chose not to participate or those who did not meet the requirements continued to be assessed premiums based on their own individual claim history and risks.

Cleveland, which was not in a pool, alleged it was overcharged by the BWC for more than 10 years, arguing that the BWC’s method for determining premiums was flawed because it over-discounted premiums it charged employers and recouped the difference by increasing the “off-balance factor” in calculating individual employers’ base rates, leading to the city being “unjustly” charged excessive premiums.

The city filed a lawsuit against the BWC in the Cuyahoga County Court of Common Pleas, asserting a claim of unjust enrichment. The BWC moved to dismiss the case on the grounds that the court of common pleas lacked jurisdiction over the case. Eventually, the case went before a bench trial, which ordered the BWC to repay Cleveland $4.5 million in restitution. The Eighth District Court of Appeals affirmed the judgment on appeal. BWC sought review from the Supreme Court of Ohio, arguing that the claim for overpayment of an amount owed to the State is a legal claim that must be brought in the Court of Claims.

The state’s high court vacated the judgment of the appellate court and common pleas courts, holding that the Ohio Court of Claims has jurisdiction over the case, finding that Cleveland could not proceed with claims for equitable relief — which could have proceeded in the Court of Common Pleas — but legal relief, in which the Court of Claims has exclusive jurisdiction. 

The justices found that even though the BWC kept track of Cleveland’s premium payments, they went into a general insurance fund where they were commingled with other premium payments and then paid out to injured workers. As a result, the court held that it is “inconceivable” that money belonging to Cleveland could be clearly traced to funds in the BWC’s possession and “cannot be recovered by a suit in equity.” As a result, the court vacated the restitution award and remanded the case to the Court of Common Pleas with an order of dismissal.

Justice Michael Donnelly dissented from the majority opinion, arguing that the court brushed aside its 2004 decision in Santos v. BWC, in which it determined that when the BWC unlawfully retained funds, “an action to correct the unjust enrichment of the BWC” is an equitable claim for restitution

“There is no reason to adopt the untenable position that when money that was unlawfully received cannot be traced to particular funds, restitution is not available,” he said. “Cleveland is not seeking one penny more than the $4,524,392 that it was unlawfully overcharged … I conclude that Cleveland's claim is in equity.”