Third Circuit Sees a Man About a Horse

Earlier this month, the Third Circuit Court of Appeals had the opportunity to see a man about a horse [and alleged fraud.]  The Court’s unanimous opinion in Charlie Johnson v. A.W. Chesterton, et al. centered around an appeal from the Office of Workers’ Compensation Court in Calcasieu Parish.  In that matter, Employer, Chesterton, and its workers’ compensation insurance carrier, CNA, terminated benefits to Claimant, Charlie Johnson, based upon Johnson’s failure to note the proceeds from the sale of a horse on his monthly 1020 forms.  Chesterton alleged that Johnson’s failure to note the proceeds from the sale as income constituted, fraud pursuant to La. R.S. 23:1208.  Chesterton averred that in preparing his monthly 1020 form, Johnson marked “No” next to the following questions:

  1. For the period covered in this report, did you receive salary, wage, sales commission, or payment, including cash of any kind?
  1. For the period involved in this report were you self-employed or involved in any business enterprise? These include but are not limited to farming, sales work, operating a business (even if the business lost money), child care, yard work, mechanical work, or any type of family business?

The record shows that Chesterton discovered that in December of 2014, Johnson had sold a horse for $3,500.00.  Subsequently, Chesterton terminated Johnson’s benefits on the basis that the sale was part of a business enterprise, and therefore, Johnson had committed fraud when he denied being a part of any business on his 1020 forms.  Following the termination of his benefits, Johnson instituted the proceedings which lead to the appeal.

In the lower court proceeding, judgment was entered in favor of Johnson because it was determined that Chesterton failed to carry its burden of proof to support a fraud defense. As a result, Johnson was awarded supplemental benefits at a zero rate of earnings, awarded penalties in the amount of $8,000.00 for the termination of benefits, as well as attorney’s fees in the amount of $10,000.00.

The Court cited the Louisiana Supreme Court’s decision in Resweber v. Haroil Constr. Co., 94–2708 (La. 9/5/95), 660 So.2d 7,16, which held that in order for false representations in workers’ compensation proceedings to be considered fraud, the false statements must be more than inadvertent or inconsequential.  This statement must be made willfully or for the purpose of obtaining benefits, and an inadvertent or inconsequential false statement should not result in the forfeiture of benefits.

The Court went on to note that a decision to impose or deny forfeiture under La. R.S. 23:1208 is a factual finding and would not be disturbed on appeal absent manifest error.  Brooks v. Madison Parish Serv. Dist. Hosp., 41,957 (La.App. 2 Cir. 3/7/07), 954 So.2d 207, writ denied, 2007–0720 (La. 5/18/07), 957 So.2d 155. To reverse a fact finder’s determination under the standard of review, an appellate court must undertake a two part inquiry: (i) the court must find from the record that a reasonable factual basis does not exist for the finding of the trier of fact; and (ii) the court must further determine the record establishes the findings clearly wrong.  Stobart v. State, Dep’t of Transp. and Dev., 617 So.2d 880 (La.1993).  Holding that “when there are two permissible views of the evidence, the workers’ compensation judge’s choice between them can never be manifestly erroneous or clearly wrong,” Id., the Court affirmed that its job was not to determine whether or not the trier of fact was right or wrong, but to determine whether the fact finder’s conclusion was a reasonable one.  That is, if the factual findings are reasonable in light of the record reviewed in its entirety, a reviewing court may not reverse, even if convinced that if it had been sitting as a trier of fact, it would have weighed the evidence differently.  Id.

Here, the Court reviewed trial testimony from Johnson that he had owned horses his entire life, and had done so as a hobby, even while employed by Chesterton.  Johnson admitted that he did sell a horse in 2014, but stated that the sale of the horse, which he had owned for 19 years, was also part of his hobby, rather than a business (though he did admit to using the horse as a tax write off.)  Testimony of a Carrier’s representative, who conceded that if Mr. Johnson had held a garage sale and sold personal property, the proceeds from that garage sale would not be material to his worker’s compensation claim, was also factored into the decision.

Ultimately, it was determined that there existed a reasonable factual basis for the workers’ compensation judge’s finding that Chesterton failed to carry its burden of proof with regard to the fraud allegation.  Concluding their review of the record, the Court found that Johnson had not willfully made false statements for the purposes of obtaining workers’ compensation benefits, that there was no manifest error in the worker’s compensation judge’s findings, and a determination that the sale of the horse was similar to the sale of a personal asset, and thus immaterial to any worker’s compensation proceedings, was deemed reasonable under the facts.

In addressing whether or not Johnson’s counsel was entitled to penalties and attorney’s fees the Court found that there was no error in such an award.  It was noted that “an increase in [attorney] fees is awarded on appeal when the defendant appeals, obtains no relief, and the appeal is necessitated more work on the part of the plaintiff’s attorney, provided that the plaintiff requests such an increase.” McKelvey v. City of Dequincy, 07–604, pp. 11–12 (La.App. 3 Cir. 11/14/07), 970 So.2d 682, 690. Because Johnson’s counsel had been forced to do more work, and had requested additional attorney’s fees, the award of additional fees was proper.

Based upon the foregoing, the decision of the workers’ compensation judge was affirmed as amended. The Court amended the judgment in favor of Mr. Johnson to award an additional $2,500.00 in attorney’s fees with costs of the appeal assessed against Chesterton.

Chesterton v. Johnson