Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-94-00124-CV

Texas Workers' Compensation Commission, the Subsequent Injury Fund,

and Todd Brown in His Official Capacity as Executive Director of

the Texas Workers' Compensation Commission, Appellants

v.

The City of Bridge City, Texas, and the Texas Municipal League

Intergovernmental Risk Pool, Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 126TH JUDICIAL DISTRICT

NO. 92-14599, HONORABLE JOSEPH H. HART, JUDGE PRESIDING

The Texas Workers' Compensation Commission, its executive director Todd

Brown, and the Subsequent Injury Fund (1) appeal from a declaratory judgment and permanent

injunction ordered by the trial court in a suit brought by the City of Bridge City, Texas, and the

Texas Municipal League Intergovernmental Risk Pool ("TML"). We will reverse the trial-court

judgment, dissolve the injunction, and render the declaratory judgment we believe the trial court

should have rendered. Tex. R. App. P. 81(c).

THE CONTROVERSY

Under the Texas Workers' Compensation Act, the legislature established a four-tier

system for the determination of claims. Subchapter B provides first for the informal resolution

of claims through a non-adversarial conference conducted by a "benefit review officer" who may

render an interlocutory order that benefits be paid or that they not be paid. The informal

conference is a prerequisite to any further proceeding toward resolution of the claim. See Tex.

Lab. Code Ann. §§ 410.021 -.024 (West 1995) ("Act"). If issues remain unresolved after the

conference, the parties may agree to resolve the claim by arbitration under Subchapter C; failing

agreement in that regard, a party may elect to determine the claim by a contested-case proceeding

under the provisions of Subchapter D. Id. §§ 410.101-.121 (arbitration); §§ 410.151-.169

(contested case). The third tier is established in Subchapter E, providing for an administrative

appeal from the hearing officer's contested-case decision to an appeals panel. Id. §§ 410.201-.208. Review outside the Commission is authorized in Subchapter F, establishing a cause of

action for judicial review of the appeals-panel decision or the hearing officer's decision if the

appeals panel fails timely to render a decision. Id. §§ 410.251-.256.

The insurance carrier must commence making any payments ordered by the benefit-review officer. If the order is reversed or modified after arbitration or the contested-case

proceeding, however, the carrier is entitled to reimbursement from the subsequent-injury fund for

any overpayment. Id. § 410.025(c). And if the appeals-panel decision affirms the carrier's duty

to pay, but the decision is finally modified or reversed by a reviewing court, the carrier is entitled

to reimbursement from the fund for any overpayment. Id. § 410.205(c). Apparently, these

provisions are construed so that the carrier is not entitled to recover any overpayment made during

the period between the date of the contested-case decision requiring payment and the date of the

appeals-panel decision affirming that decision, even though the latter decision is reversed on

judicial review.

Threatened by administrative penalties if they do not pay benefits during the only

period when reimbursement is not expressly secured by the statutory scheme, the City (a self-insurer) and TML sued for declaratory judgment that the Act is unconstitutional. (2) The trial court

held the scheme unconstitutional on the grounds indicated below and issued a permanent

injunction against enforcement of the scheme. The Commission, its executive director, and the

Subsequent Injury Fund appeal.

THE TRIAL-COURT JUDGMENT

The trial court held the statutory scheme unconstitutional on the following grounds:

1. The requirement of immediate payment of a decision and order of benefit

contested case hearing officer during the pendency of an appeal to the Appeals

Panel [ Tex. Labor Code Ann. § 410.169 ] . . . and Commission Rule 142.16(e)

through (g) violates Article 1, § 19, of the Texas Constitution because it limits

the City's property rights in a fundamentally unfair manner.

2. This pre-payment without reimbursement scheme violates Article 1, § 13, of

the Texas Constitution because it is an unreasonable interference with access

to the courts. The scheme imposes unreasonable financial barriers on court

access and fails to provide a meaningful access and fails to provide a

meaningful legal remedy to the Plaintiffs.

3. Article 1, § 17, of the Texas Constitution is also violated by this

administrative scheme. The Plaintiffs hold the disputed funds in trust for the

citizens of the City of Bridge City, Texas and the administrative requirement

that the City's funds be forfeited prior to a final decision, without hope of

recovery, is a taking in violation of the Texas Constitution.

4. The statutory scheme also violates Article 3, § 61, because it fails to provide

suitable laws for the administration of workers' compensation insurance

administration.

DISCUSSION AND HOLDINGS

I.

In their first point of error, appellants contend the trial court erred because a

municipal corporation is not a "citizen" or "person" within the meaning of the bill of rights

constituting Article I of the state constitution, specifically sections 13, 17, and 19 upon which the

trial court based its declaration that the statutory scheme is unconstitutional. Tex. Const. art. I,

§§ 13, 17, 19. We believe the trial court erred. Municipal corporations and other government

subdivisions derive their existence and powers from legislative enactments and are subject to

legislative control and supremacy. Consequently, they cannot use the sword of the due-process-of-law and other provisions of Article I to invalidate the laws that govern them. See McGregor

v. Clawson , 506 S.W.2d 922, 929 (Tex. Civ. App.--Waco 1974, no writ); Harris County v.

Dowlearn , 489 S.W.2d 140, 145 (Tex. Civ. App.--Houston [14th Dist.] 1973, writ ref'd n.r.e.);

Boyett v. Calvert , 467 S.W.2d 205, 210 (Tex. Civ. App.--Austin 1971, writ ref'd n.r.e.), appeal

dismissed for want of federal question sub nom., Anderson v. Calvert , 405 U.S. 1035 (1972); see

generally 2 Eugene McQuillin, Municipal Corporations § 4.20 (3d ed. 1988). Concerning the

corresponding guarantees in the Bill of Rights in the federal constitution, the rationale and the

result apply without distinction between a municipality's governmental and proprietary functions.

City of Trenton v. New Jersey , 262 U.S. 182, 192 (1925).

The City and TML cite Love v. City of Dallas , 40 S.W.2d 20 (Tex. 1931), in

support of the proposition that a municipality may obtain invalidation of a legislative enactment

on the basis of Article I, section 17 of the State Constitution which forbids the taking of property

without adequate compensation being first paid by the State. In Love , the court stated as follows:

Since the Constitution, art. VIII, § 3, contemplates that districts shall be organized

and taxes levied for the education of scholastics within the districts, it is obvious

that the education of nonresident scholastics is not within their ordinary functions

as quasi-municipal corporations; and under the authorities cited the Legislature is

without power to impose such an obligation on them, without just compensation.

Id. at 27. The Love opinion does not mention any section of Article I of the constitution. The

decision rests instead on Article VIII, section 3, a provision outside the bill of rights and its

guarantees to "persons" and "citizens." Thus, Love is merely one of a class of cases holding that

the legislature's supremacy and control over municipalities and other agencies of the state do not

extend so far as to permit the legislature to infringe upon rights given municipalities and other

subdivisions or agencies of the State, as such , in some express constitutional provision outside

Article I. See, e.g. , Nueces County v. People's Baptist Church , 860 S.W.2d 627, 630 (Tex.

App.--Corpus Christi 1993, writ granted); Durish v. Texas State Bd. of Ins. , 817 S.W.2d 764 , 767

(Tex. App.--Texarkana 1991, no writ). No such constitutional provision exists here.

TML comes within the principles just discussed. It was created by former article

8309h of the Texas Revised Civil Statutes, entitled Workman's Compensation Insurance for

Employees of Political Subdivisions. See Act of May 10, 1973, 63d Leg., R.S., ch. 88, § 17,

1973 Tex. Gen. Laws 198 (Tex. Rev. Civ. Stat. Ann. art. 8309h, since repealed and codified at

Tex. Lab. Code Ann. §§ 504.001 -.003, .011-.018, .051-.052, .071-.073 (West 1995)). The

relevant statute authorizes "two or more political subdivisions to establish a joint insurance fund"

to provide workers' compensation benefits for employees of the subdivision. Tex. Lab. Code

Ann. § 504.016 . The legislature may, without violating any provision of Article I or any other

article made known to us, alter or repeal these statutory provisions at any time.

The fourth basis for the trial court's judgment, an asserted violation of Article III,

section 61, of the state constitution, is not a constitutional provision within the bill of rights

constituting Article I. It lies outside Article I and is a kind of guarantee to municipalities similar

to the class involved in Love, People's Baptist Church, and Durish . See Love , 40 S.W.2d at 27 ;

People's Baptist Church , 860 S.W.2d at 360 ; Durish , 817 S.W.2d at 767. Section 61 does not,

however, confer upon municipalities any judicially enforceable right. It is, rather, a political

guarantee. Section 61 provides as follows:

The Legislature shall have the power to enact laws to enable cities, towns, and

villages . . . to provide Workmen's Compensation Insurance, including the right

to provide their own insurance risk for all employees; and the Legislature shall

provide suitable laws for the administration of such insurance in the said

municipalities and for payment of the costs, charges, and premiums on policies of

insurance and the benefits to be paid thereunder.

Tex. Const. art. III, § 61 (emphasis added).

The terms of section 61, addressed to the legislature, appear to be permissive only,

notwithstanding the word "shall" in the second clause. Id. interp. commentary (West 1984); see

also 1 George D. Braden et al., The Constitution of the State of Texas: An Annotated and

Comparative Analysis 284-89 (1977).

In any case, the question of what is a "suitable" law is not within the power of a

court to decide. By its very nature, it is a political question committed to the legislature because

it calls for pure public-policy decisions beyond a court's competence. See Davis v. City of

Lubbock , 326 S.W.2d 699, 714 (Tex. 1959). We are aware that the supreme court undertook to

determine what was not an "efficient" system of public schools in applying Article VII, section

1 to judge the constitutionality of a legislative enactment. See Edgewood Indep. Sch. Dist. v.

Kirby , 777 S.W.2d 391 (Tex. 1989). The analogy is inescapable. It is, however, the only

instance of which we are aware in which a court has undertaken such a task. It seems obvious

that only the legislature has the facilities to investigate and ascertain the state of affairs in the

complex field of workers' compensation, to make the necessary adjustment of competing interests,

to identify the objectives and purposes the state should pursue in the matter, and to compose the

new rules of conduct by which these are to be achieved. On the other hand, it appears that a

court, in a single case involving a few disputing parties, is singularly lacking in such facilities and

unfit for the task. We hold, therefore, that the trial court exceeded its power in deciding that the

statutory scheme is not "suitable" and, therefore, unconstitutional under Article III, section 61. (3)

See State v. Reyna , 333 S.W.2d 832, 838-39 (Tex. 1960).

II.

If we be mistaken in any of the foregoing, we hold the statutory scheme is not

unconstitutional on the ground that it omits to provide for reimbursement of sums paid during the

period between a hearing officer's contested-case decision and the decision of an appeals panel.

Our holding extends to each of the four constitutional provisions given in the trial-court judgment

as the grounds upon which its finding of unconstitutionality rested.

The statutory scheme comes to a reviewing court with certain presumptions that

stand until the opposite is made to appear by one who would challenge the scheme's

constitutionality: the challenger must point out precisely how a constitutional principle has been

violated; every reasonable intendment and presumption will be made in favor of constitutionality;

if there could exist a state of facts justifying the scheme, the reviewing court will assume its

existence; and the legislature is presumed to be familiar with the State's regulation and the conduct

of workers' compensation insurance operations. Massachusetts Indem. & Life Ins. Co. v. Texas

State Bd. of Ins. , 685 S.W.2d 194, 109 (Tex. App.--Austin 1985, writ ref'd n.r.e.).

Under each of the four constitutional grounds named in the trial-court order, we

believe the issue reduces to one of substantive due process of law, an inquiry whether the

omission to provide for reimbursement in one stage, while providing for it in the others, is

rationally related to a legitimate state interest in a highly regulated, complex, economic field. Id.

at 113-14. We believe the State's interest in securing payment to an injured worker as soon as

practical is as obvious as a worker's private interest in that regard. On the other hand, the State

is bound to weigh the likelihood that the injured worker is not legally entitled to the sums he

claims. Assurance against that likelihood is itself a legitimate state interest of equal weight, even

as it is simultaneously a matter in which the insurance carrier has a keen interest of its own; the

availability of insurance is essential for the Act to work at all. See generally Middleton v. Texas

Power & Light Co. , 185 S.W. 556 (Tex. 1916), aff'd , 249 U.S. 152 (1919).

The statutory provisions for the contested-case proceeding are distinctly trial-type

procedures designed to result in determinations made according to the facts and the law. They

include adequate notice, the opportunity to present evidence, legal argument and rebuttals thereto,

representation by counsel, a decision based only upon evidence introduced into the record of the

hearing, and a complete record consisting of a transcript of testimony and arguments, together

with the documentary evidence and all other papers filed in the proceeding. See Tex. Lab. Code

Ann. §§ 410.151 -.168; Administrative Procedure Act, Tex. Gov't Code Ann. §§ 2001.051 -.147

(West 1995). There can be no question that these provisions exceed the minimum requirements

of procedural due process of law. Bernard Schwartz, Administrative Law § 5.1, at 203-04 (2d ed.

1984).

It is obvious that the interim between the time a benefit-review officer orders

payment to the injured worker and the time such order is modified after a contested-case hearing

may be lengthy, given the minimum due process requirements mentioned above and the additional

protections, such as provisions for discovery and continuances, that apply in contested cases

conducted under the Administrative Procedure Act. Consequently, section 410.032(b) provides

reimbursement protection for the insurer. Similarly, a lengthy period may expire before a

reviewing court finally reverses or modifies an appeals-panel decision awarding benefits;

accordingly, section 410.205(c) provides reimbursement protection for the insurer.

The situation is distinctly different, however, concerning the interim period

between the date a hearing officer issues his or her decision in a contested case and the date an

appeals panel makes it decision. A party filing a request for appeal must do so not later than the

fifteenth day after the date on which the decision of the hearing officer is received; the respondent

must file a written response with the appeals panel not later than the fifteenth day after service of

the request for appeal; and the appeals panel must give its decision in writing not later than the

thirtieth day after the response is filed, or the decision of the hearing officer becomes final and

tantamount to the final decision of the appeals panel. Act § 410.204.

We conclude the legislature could rationally adjust the competing public and private

interests in the manner set out in the statutory scheme. The insurer's interest in protecting itself

against legally erroneous payment orders is secured to a large degree by two factors. Firstly, the

contested-case proceedings are conducted by legally trained persons (4) with elaborate trial-type

procedures designed to assure legally correct decisions based upon the law and the facts. The risk

of an erroneous decision is reduced accordingly. Secondly, the interim between the contested-case

decision and the appeals-panel decision is designedly short, thereby reducing the period in which

the carrier may be required to make the interlocutory payments, and thus limiting the maximum

amount of such payments, without an express provision for reimbursement should the carrier

ultimately prevail on judicial review.

And the "omission" of which appellees complain must be judged in context. The

face of the Act reflects innumerable compromises and adjustments made in the course of the

legislative process. The claimed "omission" appears to be only one of these. While appellees

conceive themselves injured by the "omission" to provide reimbursement for the limited payments

made in the short period indicated, an injured employee might feel much the same by having to

bear the entire risk of loss over and above the maximums allowed by section 408.061, the denial

of all benefits under section 408.082 when the duration of disability is a week or less, or any of

the various definitions and other qualifications that are applicable in determining whether and to

what extent an employee may receive benefits. These compromises and adjustments do not

amount to a denial of due process of law. See Middleton v. Texas Power & Light Co. , 249 U.S.

152, 163 (1919).

We therefore reverse the trial-court judgment, dissolve the permanent injunction,

and render a declaratory judgment that section 410.169 of the Texas Labor Code and Commission

rule 142.16 (e) through (g) are constitutional.

John Powers, Justice

Before Justices Powers, Kidd and B. A. Smith

Reversed and Rendered

Filed: May 24, 1995

Publish

1. "The subsequent injury fund is a special fund in the state treasury." Tex. Lab. Code

Ann. § 403.006 (West 1995).

2. Appellants served the Attorney General with a copy of the petition pursuant to section

37.006 of the Civil Practice and Remedies Code. Tex. Civ. Prac. & Rem. Code Ann. § 37.006

(West 1986). The Attorney General declined to intervene.

3. If the Congress or a state legislature has passed an inadequate statute, why should it

not be revised by judicial construction? If the statute is one that is manifestly unwise, harsh

or out-of-date, why should it not be abrogated by the exercise of the power of judicial

review? . . .

The objections to such alluring but deceptive plausibilities are more deep-seated than might appear at first blush. For in the end what would eventuate

would be a substantial transfer of legislative power to the courts. A function

more ill-suited to judges can hardly be imagined, situated as they are, and

should be, aloof from the political arena and beholden to no one for their

conscientious conduct. Such a course would also denigrate the legislative

process, since it would tend to relieve legislators from having to account to the

electorate. The outcome would inevitably be a lessening, on the one hand, of

judicial independence and, on the other, of legislative responsibility, thus

polluting the blood stream of our system of government. We should be on guard

against any such deliberate or unwitting folly.

Justice John M. Harlan, Thoughts at a Dedication: Keeping the Judicial Function in Balance ,

49 A.B.A. J. 943 , 944 (1963).

4. Act § 410.152.