Is Timing Everything Where Workers Compensation Benefits are Forfeited Based on Fraud? It Depends…

The United States Attorney for the Eastern District of Louisiana recently announced that two defendants, Doniesha Gibson and Erica Lee, had been sentenced for crimes related to staging automobile collisions with tractor-trailers. The sentences were announced as part of a criminal investigations known as "Operation Sideswipe." The years-long operation has produced multiple pleas and convictions, including a guilty plea from an involved attorney last year.

Gibson admitted that she was a passenger in a staged accident that occurred on October 15, 2015. A co-defendant intentionally drove the vehicle she occupied into a bus on the interstate. Gibson retained an attorney and filed a suit for damages. Claims related to this accident later settled for $667,500.00

Lee also admitted to filing a suit to claim injuries after the driver of the vehicle she occupied intentionally crashed into a tractor trailer on September 6, 2017. The claims for this suit settled for $30,000.00

United States District Judge Sarah S. Vance sentenced Gibson to 17 months incarceration plus 3 years of supervised release and ordered Gibson to pay restitution in the amount of the settlement. Lee was sentenced to serve 3 years of probation and 100 hours of community service. She was also ordered to pay restitution.

While “Operation Sideswipe” did not involve the typical claimants, it reminds of the need for vigilance in assessing accident claims.

For years, Louisiana plaintiffs attorneys have argued that the force ofimpact in an auto accident is not determinative of their clients’ injuries andshould be afforded little, if any, weight. A recent decision out of theLouisiana First Circuit Court of Appeal does damage to that argument. In Jonesv. Bravata, Jr. and The City of Baton Rouge, 2018 CA 0837 (La. App. 1 Cir.5/9/19), the First Circuit upheld the trial court's jury instruction on “forceof impact” where photographs showed only minor damage and the defendantdescribed the accident as a “bump.”

The accident occurred when a City employee rear-ended the plaintiffs'vehicle. Liability was stipulated and the only question at trial was damages.Mrs. Jones alleged severe neck and back injuries. She began treatment with anorthopedist within a week of the accident and thereafter received five“relatively non-invasive surgical procedures” in lieu of a lumbar fusionsurgery. The jury returned a verdict of $200,000, which included $150,000 inpast medical expenses and $35,000 in future medical expenses, but awardedlittle for general damages. Mrs. Jones appealed the verdict, asserting that thetrial court erred in instructing the jury on force of impact.

The "force of impact" jury instruction in dispute provided:

Whilethe force of a collision may be considered in determining whether a person wasinjured by an accident and the extent of the injuries sustained, it should notbe the only factor to consider in making such a determination. Even though theforce of impact may be slight, it does not preclude an award of damages.However, in determining causation, you may consider the minimal nature of theaccident.

In considering the plaintiff's assignment of error, the First Circuit noted that Mrs. Jones was correct that no witness specifically testified that the accident was too minor to have caused her injuries. However, there was evidence in the record upon which the jury could have reached the conclusion that this was a minimal impact.

Common sense would appear to support a connection between the force of an impact and the injury one could be expected to suffer. The recent Jones decision allows defendants to promote this common sense argument. Where the claimed injuries are disproportionate to the forces involved, this argument can make the difference at trial.

John Grinton is a partner of the firm admitted in state, federal and appellate courts throughout Louisiana. His practice focuses on commercial and construction litigation, representing insurance companies, architects, engineers, contractors and other businesses in all aspects of litigation. His workers’ compensation practice includes representing clients in medical billing disputes, healthcare provider disputes, statutory/borrowing/special employer disputes, and court approved settlements. John has been involved in complex cases involving construction defect claims, breach of contract and negligence actions, insurance coverage issues, lender liability, securities litigation and personal injury matters. He has firsthand experience in jury trials and arbitration's, as well as mediation, appellate briefing and oral argument.

The Louisiana Supreme Court recently held that the New Home Warranty Act ("NHWA") is not the exclusive remedy for a purchaser of a new home where the builder fails to disclose known defects in the Residential Property Disclosure Act ("RPDA"). Stutts v. Melton, 2013-0557, -- So.2d. ----. The Court also upheld an award of damages and attorney fees for fraud victims who elect not to seek rescission of a sales contract despite no Civil Code article expressly allowing for attorney fees in such instances.

Builder Chad Melton completed a home in Walker, Louisiana in 2004. He and his wife lived in the home for approximately nine months prior to selling the home to James and Lisa Stutts. The Residential Property Disclosure Act, La. R.S. 9:3196, et seq., requires disclosures of known problems with a home prior to sale. Melton provided the Stutts with a disclosure form, but failed to mention that color had previously been observed bleeding onto the walls of the home from the roof.

In Stutts, it was factually established that Melton was aware of the roof defect because he had entered into a $13,600 settlement with the roof manufacturer to fund the replacement of the roof. Nevertheless, Melton cleaned the walls and installed gutters instead of the more expensive roof replacement.

Melton's gutter solution was ill-advised and unsuccessful. After discovering the problem in the summer of 2006, the Stutts filed suit seeking as damages: the repair costs for the roof; costs for additional repairs; and attorney fees.

The Stutts filed a motion for summary judgment on their fraud claim citing La. C.C. art. 1953. The Meltons opposed the motion, arguing that the NHWA provides the "exclusive remedy" available to the Stutts. The motion was granted and, after a bench trial on damages, the trial judge awarded damages to include attorney fees.

The court of appeal reversed both the summary judgment and the money judgment, holding that the Stutts' claims were untimely under the NHWA.The NHWA provides a one year warranty period for new home construction and an additional thirty day period in which to file suit under the Act. By its terms, the NHWA provides the "exclusive remedies" between a builder and an owner relative to home construction.

The Louisiana Supreme Court reversed and reinstated that lower court's judgment. The Court held that the RPDA applied in this case because the home had been occupied by the Meltons after construction was completed. Even though the NHWA claims were prescribed, the Stutts possessed a timely claim that Melton had provided a fraudulent disclosure in violation of the RPDA.

The Court next addressed the Stutts' claim for attorney fees. The Court observed that no statute specifically authorized attorney fees where the plaintiff does not seek rescission of the sale. However, the Court reasoned, citing principles of equity found in Louisiana Civil Code article 4, that the legislature surely did not intend for victims of fraud to go uncompensated if they elect not to seek full rescission of the sale. Accordingly, attorney fees were held appropriate where fraud is committed but the victim elects not to seek rescission of the contract.

The Court's holding in Stutts may have a limited impact on the NHWA because of the peculiar facts of the case, i.e. the builder of the new construction living in the completed home before selling it to plaintiffs. However, the Court's award of attorney fees is an interesting development in the law. Time will tell whether the Court may be inclined to create further exceptions to the established rule that attorney fees cannot be awarded in the absence of statutory or contractual language awarding attorney fees.