Cleveland v. Ohio Bur. of Workers' Comp. (Slip Opinion)

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as

Cleveland v. Ohio Bur. of Workers’ Comp., Slip Opinion No. 2020-Ohio-337.]

NOTICE

This slip opinion is subject to formal revision before it is published in an

advance sheet of the Ohio Official Reports. Readers are requested to

promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65

South Front Street, Columbus, Ohio 43215, of any typographical or other

formal errors in the opinion, in order that corrections may be made before

the opinion is published.

SLIP OPINION NO. 2020-OHIO-337

THE CITY OF CLEVELAND, APPELLEE v. OHIO BUREAU OF WORKERS’

COMPENSATION, APPELLANT.

[Until this opinion appears in the Ohio Official Reports advance sheets, it

may be cited as Cleveland v. Ohio Bur. of Workers’ Comp., Slip Opinion No.

2020-Ohio-337.]

R.C. 2743.03(A)—Employer’s claim against Bureau of Workers’ Compensation is

a legal claim, not an equitable claim, and thus, it should have been filed in

the Court of Claims.

(No. 2018-0572—Submitted September 10, 2019—Decided February 5, 2020.)

APPEAL from the Court of Appeals for Cuyahoga County,

No. 105604, 2018-Ohio-846.

__________________

O’CONNOR, C.J.

{¶ 1} In this appeal, we consider which court has jurisdiction over an

employer’s claim against the Ohio Bureau of Workers’ Compensation (“BWC”)

for the reimbursement of alleged excessive premiums paid by the employer.

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Specifically, appellee, the city of Cleveland, alleges that appellant, the BWC,

charged the city inflated premiums for workers’ compensation insurance in order

to make up for discounts the BWC provided other employers. Cleveland raised this

claim in a complaint it filed in the Cuyahoga County Court of Common Pleas. We

hold that this is a legal claim, not an equitable one, and therefore the Court of

Claims has exclusive jurisdiction over this case. Accordingly, we reverse the

judgment of the Eighth District Court of Appeals, vacate all orders of the Cuyahoga

County Court of Common Pleas in this case, and remand the cause to the common

pleas court for an order of dismissal.

I. FACTS AND PROCEDURAL BACKGROUND

{¶ 2} Cleveland, as an employer, pays the BWC premiums for workers’

compensation insurance. The BWC is then responsible for the distribution of

workers’ compensation benefits to city employees who suffer workplace injuries.

In this case, Cleveland challenges the legality of premiums that the BWC charged

over several years. According to Cleveland, the BWC undercharged the group-

rated employers and then overcharged the individually rated employers, such as

Cleveland, to make up the difference. The narrow issue before us is whether the

case was properly filed in the court of common pleas or whether it should have been

filed in the Court of Claims, which has exclusive jurisdiction over certain claims

against state entities such as the BWC. R.C. 2743.03(A).

A. The Ohio Workers’ Compensation system

{¶ 3} Ohio requires public employers that are not self-insured employers to

contribute to the public insurance fund “the amount of money determined by the

administrator of workers’ compensation.” R.C. 4123.38. Employers can choose

from a selection of plans. The BWC offers both individual- and group-rated plans.

{¶ 4} Pursuant to R.C. 4123.29(A), the administrator of the BWC, with the

approval of the board of directors, classifies occupations or industries with respect

to degree of hazard and risks and sets the premiums that employers must pay into

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the state insurance fund for workers’ compensation coverage each year. The BWC

deposits these premiums into a single state insurance fund (it does not maintain a

separate account for each employer), and it pays compensation benefits associated

with work-related accidents from that fund. With the exception of a required

surplus to maintain solvency, R.C. 4123.321 requires the BWC to establish a

procedure for returning excess premiums to participating employers in order to

maintain a revenue-neutral fund.

{¶ 5} Cleveland alleges that it was overcharged by the BWC for more than

ten years because the BWC’s method for determining premiums was flawed. In

1989, the General Assembly amended R.C. 4123.29 to require the BWC to develop

and implement a plan that “groups, for rating purposes, employers, and pools the

risk of the employers within the group.” Am.Sub.H.B. No. 222, 143 Ohio Laws,

Part II, 3197, 3315-3316. In response to this amendment, the BWC developed

group-rated plans. Provided they met certain conditions, employers could elect to

join a group-rated plan in which their collective risk was pooled in order to garner

better premiums. The employers that chose not to participate in a group-rated plan

or that did not meet the required conditions continued to be assessed premiums

based upon their individual claim history and risks.

{¶ 6} The BWC acknowledges that during the years at issue, the discounted

premiums it charged employers under the group-rated plan were insufficient to

cover the losses attributable to those employers. Because the BWC must maintain

a revenue-neutral fund, it had to find a way to recoup that difference. It did so by

increasing the “off-balance factor,” a factor used in calculating the employers’ base

rates. Cleveland alleges that this increase resulted in its unjustly being charged

excessive premiums.

B. Cleveland files suit

{¶ 7} In 2013, Cleveland sued the BWC in the Cuyahoga County Court of

Common Pleas, asserting a claim of unjust enrichment on the ground that the

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discounts provided to group-rated employers resulted in the individually rated

employers, such as Cleveland, paying excessive premiums. Cleveland sought an

order requiring the BWC to disgorge the amount of overpayment along with

prejudgment and postjudgment interest. The BWC moved to dismiss the case,

arguing that the common pleas court lacked subject-matter jurisdiction over the

lawsuit because the city was seeking legal, rather than equitable, remedies, and

thus, the Court of Claims had exclusive jurisdiction. The trial court denied the

motion to dismiss and eventually granted summary judgment, in part, to Cleveland

and ordered a bench trial on the amount of restitution owed to Cleveland due to its

payment of inflated premiums.

{¶ 8} Following the bench trial, the trial court ordered the BWC to pay

Cleveland $4,524,392 in restitution, along with postjudgment interest at the

statutory rate. The Eighth District Court of Appeals affirmed the judgment on

appeal.

{¶ 9} The BWC sought this court’s discretionary review, raising three

propositions of law. We accepted jurisdiction over all three, 153 Ohio St.3d 1432,

2018-Ohio-2639, 101 N.E.3d 464, but because we resolve this case on the first

proposition of law, we need not address the other two. The first proposition of law

states:

A claim for overpayment of an amount owed to the State,

under a statute that undisputedly requires some payment, and where

the amount of alleged overpayment is derived from an estimated

damages model rather than a known sum, is a legal claim that must

be brought in the Court of Claims.

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II. ANALYSIS

{¶ 10} To determine whether the Court of Claims or the court of common

pleas has jurisdiction over Cleveland’s claim, we must decide whether the claim is

legal or equitable. Measles v. Indus. Comm., 128 Ohio St.3d 458, 2011-Ohio-1523,

946 N.E.2d 204, ¶ 7. Traditionally, the doctrine of sovereign immunity prevented

claims against agents of the state, such as the BWC, for wrongs committed in the

course of official duties. Scot Lad Foods, Inc. v. Secy. of State, 66 Ohio St.2d 1, 6,

418 N.E.2d 1368 (1981). However, sovereign immunity does not bar claims for

equitable relief, only for legal relief. Ohio Hosp. Assn. v. Ohio Dept. of Human

Servs., 62 Ohio St.3d 97, 105, 579 N.E.2d 695 (1991). In 1975, the General

Assembly waived the state’s sovereign immunity in most instances, R.C. 2743.02;

Am.Sub.H.B. No. 800, 135 Ohio Laws, Part II, 869, 883, and simultaneously

created the Court of Claims, which has “exclusive, original jurisdiction of all civil

actions against the state permitted by the waiver of immunity contained in section

2743.02,” R.C. 2743.03(A)(1). Accordingly, the state is now subject to being sued

for legal claims in the Court of Claims. However, because the doctrine of sovereign

immunity never barred equitable claims, which have always been cognizable

against the state, courts of common pleas continue to have original jurisdiction over

them pursuant to Article I, Section 16, and Article IV, Section 4(B) of the Ohio

Constitution and R.C. 2305.01.

{¶ 11} Restitution can be either legal or equitable relief, depending on the

basis for the plaintiff’s claim and the “nature of the underlying remedies sought.”

Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 212-213, 122 S.Ct.

708, 151 L.Ed.2d 635 (2002). Historically, a legal claim for restitution was one in

which the plaintiff “ ‘could not assert title or right to possession of particular

property, but in which nevertheless he might be able to show just grounds for

recovering money to pay for some benefit the defendant had received from him.’ ”

(Emphasis deleted.) Great-West at 213, quoting 1 Dobbs, Law of Remedies,

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Section 4.2(1), at 571 (2d Ed.1993). An equitable claim for restitution was one in

which “money or property identified as belonging in good conscience to the

plaintiff could clearly be traced to particular funds or property in the defendant’s

possession.” Id.

{¶ 12} The United States Supreme Court has recognized that most claims

are legal: “ ‘Almost invariably * * * suits seeking * * * to compel the defendant to

pay a sum of money to the plaintiff are suits for “money damages,” as that phrase

has traditionally been applied, since they seek no more than compensation for loss

resulting from the defendant’s breach of legal duty.’ ” (First ellipsis sic.) Id. at

210, quoting Bowen v. Massachusetts, 487 U.S. 879, 918-919, 108 S.Ct. 2722, 101

L.Ed.2d 749 (1988) (Scalia, J., dissenting). However, in a few cases, we have found

suits for the recovery of funds to be claims in equity.

{¶ 13} In Santos v. Ohio Bur. of Workers’ Comp., injured employees sought

to recover money that had been collected from them by the BWC pursuant to a

subrogation statute that was subsequently determined to be unconstitutional. 101

Ohio St.3d 74, 2004-Ohio-28, 801 N.E.2d 441. We determined that because the

subrogation statute was unconstitutional, any collection or retention of moneys was

unlawful and therefore the action seeking restitution was “an action to correct the

unjust enrichment of the BWC [and sought] the return of specific funds wrongfully

collected.” Id. at ¶ 17. Thus, we concluded that the employees’ claim was an

equitable claim.

{¶ 14} In another case, we held that a claim by Medicaid providers seeking

monetary relief from the Ohio Department of Human Services, following its

implementation of an unlawful administrative rule that reduced reimbursement

rates, was an equitable claim. Ohio Hosp., 62 Ohio St.3d 97, 579 N.E.2d 695. In

reaching this conclusion, we relied on the following analysis by the United States

Supreme Court in Bowen:

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“Damages are given to the plaintiff to substitute for a suffered loss,

whereas specific remedies ‘are not substitute remedies at all, but

attempt to give the plaintiff the very thing to which he was entitled.’

D. Dobbs, Handbook on the Law of Remedies 135 (1973). * * *

“* * * Maryland [the plaintiff] is seeking funds to which a

statute allegedly entitles it, rather than money in compensation for

the losses, whatever they may be.”

(Emphasis deleted and ellipses and brackets added.) Id. at 895, quoting Maryland

Dept. of Human Resources v. Dept. of Health & Human Servs., 763 F.2d 1441,

1446 (D.C.Cir.1985).

{¶ 15} In the present case, even if the premiums charged by the BWC

violated R.C. 4123.34(C)’s mandate that the BWC develop equitable rules for a

rating system, as the trial court and the Eighth District determined, rendering its

collection of a portion of the money unlawful, Cleveland’s claim does not sound in

equity.

{¶ 16} Since we decided Santos and Ohio Hosp. Assn., the United States

Supreme Court has provided clear guidance regarding what constitutes equitable

relief, and that guidance further supports our determination that the claim here is a

legal claim. In 2016, the court explained that a claim sounded in law if it sought to

recover from a defendant’s general assets rather than “specifically identified funds

that remain in the defendant’s possession.” Montanile v. Natl. Elevator Industry

Health Benefit Plan Bd. of Trustees, __ U.S. __, 136 S.Ct. 651, 658, 193 L.Ed.2d

556 (2016). The court further explained that “[e]quitable remedies ‘are, as a general

rule, directed against some specific thing; they give or enforce a right to or over

some particular thing * * * rather than a right to recover a sum of money generally

out of the defendant’s assets.’ 4 S. Symons, Pomeroy’s Equity Jurisprudence

§ 1234, p. 694 (5th ed. 1941) (Pomeroy).” (Ellipsis sic.) Montanile at __, 136 S.Ct.

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at 658-659. The court stated that if there is not a specifically identifiable fund, or

traceable items on which the money from the fund was spent, to seize, “the plaintiff

could not attach the defendant’s general assets instead.” Id. at 659. In such a case,

“[t]he plaintiff had ‘merely a personal claim against the wrongdoer’—a

quintessential action at law.” Id., quoting Restatement of the Law, Restitution,

Section 215(1), at 866 (1936).

{¶ 17} Although the BWC kept track of the amount of Cleveland’s

premium payments, R.C. 4123.34(A), Cleveland’s premiums went into a general

insurance fund, R.C. 4123.30, i.e., they were not kept separate from payments made

by other public employers. Once Cleveland’s premium payment was deposited into

the fund, it became commingled with the premium payments from other employers.

And even if we considered the state insurance fund itself to be a specific fund,

Cleveland paid the last funds it seeks to recover in 2009. It is inconceivable how

money belonging to Cleveland could “clearly be traced to particular funds or

property” in the BWC’s possession, see Great-West, 534 U.S. at 213, 122 S.Ct.

708, 151 L.Ed.2d 635 (Historically, an equitable claim for restitution was one in

which “money or property identified as belonging in good conscience to the

plaintiff could clearly be traced to particular funds or property in the defendant’s

possession”). The BWC has paid that money out as compensation to injured

workers or refunds to covered employers. The money allegedly overpaid is no

longer in the BWC’s possession and cannot be recovered by a suit in equity. Thus,

Cleveland’s claim sounds in law and must proceed through the Court of Claims,

which has exclusive jurisdiction over legal claims against the BWC.

III. CONCLUSION

{¶ 18} For the foregoing reasons, we reverse the decision of the court of

appeals, vacate all orders by the trial court in this matter, and remand the cause to

the Cuyahoga County Common Pleas Court with instructions to dismiss the cause

for lack of subject-matter jurisdiction.

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Judgment reversed,

trial-court orders vacated,

and cause remanded.

KENNEDY, FRENCH, FISCHER, DEWINE, and STEWART, JJ., concur.

DONNELLY, J., dissents, with an opinion.

_________________

DONNELLY, J., dissenting.

{¶ 19} In Santos v. Ohio Bur. of Workers’ Comp., 101 Ohio St.3d 74, 2004-

Ohio-28, 801 N.E.2d 441, ¶ 17, this court determined that when the Bureau of

Workers’ Compensation (“BWC”) unlawfully retains funds to which it is not

entitled, “an action to correct the unjust enrichment of the BWC” is an equitable

claim for restitution. Santos remains good law. See Cirino v. Ohio Bur. of Workers’

Comp., 153 Ohio St.3d 333, 2018-Ohio-2665, 106 N.E.3d 41, ¶ 28 (lead opinion

citing Santos with approval). Yet the majority opinion today determines that an

action seeking restitution of funds that the BWC unlawfully collected from the city

of Cleveland is not an equitable action. In this case, the majority opinion brushes

aside Santos, without overruling it, by linking its view of restitution to the view

espoused by the United States Supreme Court. See Majority opinion at ¶ 16, relying

on Montanile v. Natl. Elevator Industry Health Benefit Plan Bd. of Trustees, __U.S.

__, 136 S.Ct. 651, 658, 193 L.Ed.2d 556 (2016). In doing so, it has essentially

determined that a court can never order restitution of money.

{¶ 20} The majority opinion states, “It is inconceivable how money

belonging to Cleveland could ‘clearly be traced to particular funds or property’ in

the BWC’s possession * * *.” Majority opinion at ¶ 17, quoting Great-West Life

& Annuity Ins. Co. v. Knudson, 534 U.S. 204, 213, 122 S.Ct. 708, 151 L.Ed.2d 635

(2002). I agree with the statement, but I disagree with the import the majority gives

it. If a party can avoid a claim for restitution of money simply by commingling

funds, then there will never be a successful claim for restitution of money. The

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majority opinion doesn’t state this position, but that is the logical extension of its

statement. The problem is that in the modern age, most money is not a physical

thing but is simply represented by numbers on a page, whether paper or electronic.

{¶ 21} 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. Money is not like most assets—it is intrinsically fungible. When a

person seeks the return of $100, he or she never insists that the $100 be the exact

same bills possessed previously; any $100 will do just fine—for that matter, so will

a check or an electronic transfer. Other assets are different, when a person seeks

restitution of a ring, he or she is seeking a specific ring; rings have specific

differentiating characteristics, both good and bad. Whereas one hundred dollars is

one hundred dollars.

{¶ 22} The BWC has assets in excess of $28 billion. See Fiscal Year 2018

Annual Report of the Ohio Bureau of Workers’ Compensation,

https://www.ic.ohio.gov/news/annualreport_pdfs/bwc_ic_annual_2018.pdf

(accessed Jan. 21, 2020) at page 3 [https://perma.cc/2KKQ-DG82]. It does not

keep those funds in discernible stacks of bills and coins. That should not render it

immune from a claim for restitution of money. The BWC was found to have

overcharged Cleveland by $4,524,392, and it has ample funds available from which

to make restitution.

{¶ 23} Cleveland is not seeking damages or any other legal remedy.

Cleveland is not seeking one penny more than the $4,524,392 that it was unlawfully

overcharged. Based on Santos, 101 Ohio St.3d 74, 2004-Ohio-28, 801 N.E.2d 441,

I conclude that Cleveland’s claim is in equity. I would affirm the sound judgment

of the court of appeals. Accordingly, I dissent.

_________________

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Barbara A. Langhenry, Cleveland Director of Law, and Lisa A. Mack,

Assistant Director of Law; and Calfee, Halter & Griswold, L.L.C., Maura L.

Hughes, Mitchell G. Blair, and Alexander B. Reich, for appellee.

Dave Yost, Attorney General, Benjamin M. Flowers, Deputy Solicitor,

Michael J. Hendershot, Chief Deputy Solicitor, and Stephen P. Carney, Deputy

Solicitor; and Taft, Stettinius & Hollister, L.L.P., James D. Abrams, and Michael

J. Zbiegien Jr., for appellant.

Garry E. Hunter, urging affirmance for amicus curiae, the Ohio Municipal

League.

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