Petitioner Below, Appellant
GREGORY A. BURTON, IN HIS CAPACITY AS ACTING COMMISSIONER,
WEST VIRGINIA BUREAU OF EMPLOYMENT PROGRAMS,
WORKERS' COMPENSATION DIVISION, AND
WEST VIRGINIA DIVISION OF TRANSPORTATION,
DIVISION OF HIGHWAYS,
Respondents Below, Appellees
Appeal from the Circuit Court of Kanawha County
Honorable James C. Stucky, Judge
Civil Action No. 00-C-1373
Submitted: February 22, 2005
Filed: May 16, 2005
2. The phrase substantially all in W.Va. Code § 23-2-14(b) (2003), regarding the determination of successor liability under the Workers' Compensation Act, means all but an insignificant amount.
3. Interpretations as to the meaning and application of workers' compensation statutes rendered by the Workers' Compensation Commissioner, as the governmental official charged with the administration and enforcement of the workers' compensation statutory law of this State, pursuant to W.Va. Code § 23-1-1 (1997) (Repl.Vol. 1998), should be accorded deference if such interpretations are consistent with the legislation's plain meaning and ordinary construction. Syllabus Point 4, State ex rel. ACF Industries v. Vieweg, 204 W.Va. 525, 514 S.E.2d 176 (1999).
4. The judiciary is the final authority on issues of statutory construction, and we are obliged to reject administrative constructions that are contrary to the clear language of a statute. Syllabus Point 5, CNG Transmission Corp. v. Craig, 211 W.Va. 170, 564 S.E.2d 167 (2002).
Appellant IPI, Inc. appeals the September 19, 2003, order of the Circuit Court of Kanawha County that upheld a May 22, 2001, order of the Commissioner of the West Virginia Bureau of Employment Programs Workers' Compensation Division. The Commissioner's order adopted the recommended decision of the Workers' Compensation Division Hearing Examiner that IPI, Inc. is the successor to North American Construction, Inc. and, as successor, is liable for the workers' compensation debt resulting from the reclassification and delinquencies of North American Construction, Inc. and its predecessor company, North American, Inc. After reviewing the arguments of the parties, the record below, and the applicable law, we reverse the circuit court.
IPI was informed by a notice of reclassification, notice of succession, and notice of delinquency, dated April 24, 2000, that Appellee Workers' Compensation Division (hereafter the Division) (See footnote 1) found IPI to be the successor to the liability of North American Construction, Inc. (hereafter North American) pursuant to W.Va. Code § 23-2-14 (1999). (See footnote 2) North American was co-owned by Taylor and Joseph Morris and became a subscriber to the Workers' Compensation system in 1996. In 1997, Taylor discovered that North American was seriously delinquent in the payment of monies owed to First National Bank of Ronceverte and the Workers' Compensation Division as well as several other entities. Joseph Morris ultimately pled guilty to various charges relating to these financial delinquencies. Thereafter, Morris transferred North American stock to Taylor, giving Taylor control of the business. Taylor subsequently shut down North American.
In December 1997, First National Bank of Ronceverte (hereafter the bank) won a default judgment against North American, Joseph Morris, and Taylor in the amount of $463,773.00 with interest at the rate of 10% from the entry of judgment until paid, and perfected judgment liens against their real and personal property. To satisfy part of the judgment owed the bank, Taylor, with the bank's permission, sold North American's real property, at a value of approximately $125,000.00. In April 1998, IPI entered into an equipment lease agreement with North American Development, Inc. (See footnote 3) wherein IPI agreed to lease some of North American's equipment. Taylor signed this contract on behalf of both IPI and North American Development, Inc.
The Division ultimately reclassified North American from small sheet metal building erection to the painting of steel and other high rise structures. (See footnote 4) As a result of this reclassification, in addition to the reclassification of North American's predecessor business, (See footnote 5) North American, Inc., North American was found to be delinquent in its payment of Workers' Compensation premiums to the Division. Because the Division determined that IPI is North American's successor, it found that IPI owes the Division $865,486.57 which wholly comprises the delinquencies of North American and its predecessor.
receiving the notice of reclassification, notice of succession, and notice of
delinquency, IPI protested the findings to the Division. The Hearing Examiner,
after holding hearings in which evidence was adduced, issued a recommended decision
of April 19, 2001, in which he found, inter alia, that IPI is a successor
to North American and, as its successor, is liable for debt in the amount of
$865,486.57. The Hearing Examiner's recommended decision was affirmed by the
Workers' Compensation Commissioner (See
footnote 6) and the Circuit Court of Kanawha County which adopted
the Division's findings of fact and conclusions of law.
reviewing an ALJ's decision that was affirmed by the circuit court, this Court
accords deference to the findings of fact made below. This Court reviews decisions
of the circuit [court] under the same standard as that by which the circuit [court]
reviews the decision of the ALJ. We must uphold any of the ALJ's factual findings
that are supported by substantial
evidence, and we owe substantial deference to inferences drawn from these facts.
. . . We review de novo the conclusions of law and application of law
to the facts.
Notwithstanding any provisions of section five-a [§ 23-2- 5a] of this article to the contrary, in the event that a new employer acquires by sale or other transfer or assumes all or substantially all of a predecessor employer's assets:
Any liens for payments owed to the commission for premium taxes, premium deposits,
interest or other payments owed to the commission by the predecessor employer
shall be extended to the successor employer;
(2) Any liens held by the commission against the predecessor employer's property shall be extended to all of the assets of the successor employer; and
(3) Liens acquired in the manner described in subdivisions (1) and (2) of this subsection are enforceable by the commission to the same extent as provided for the enforcement of liens against the predecessor employer in section five-a [§ 23- 2-5a] of this article.
According to W.Va. Code § 23-2-14(e),
used in this article, the term assets means all property of whatever
type in which the employer has an interest including, but not limited to, goodwill,
business assets, customers, clients, contracts, access to leases such as the
right to sublease, assignment of contracts for the sale of products, operations,
stock of goods or inventory, accounts receivable, equipment or transfer of substantially
all of its employees.
Finally, subdivision (f) of W.Va. Code § 23-2-14 provides,
The transfer of any assets of the employer is presumed to be a transfer of all or substantially all of the assets if the transfer affects the employer's capacity to do business. The presumption can be overcome upon petition presented and an administrative hearing in accordance with section seventeen [§ 23-2-17] of this article.
The Hearing Examiner based his recommended decision that IPI is North American's successor on the fact that IPI leased from North American a substantial portion of North American's equipment; IPI acquired at least three key management employees of the ten employees who worked for North American at the time North American ceased operations; IPI completed the work on a contract entered into but left unfinished by North American; IPI, in the year it began operations, had job contracts with eight separate entities of which four were previous customers of North American; and Taylor, through correspondence, attempted to receive favorable consideration for IPI from former North American customers and held IPI out to be a successor to North American.
IPI, in challenging the finding that it is North American's successor, first asserts that it never acquired a majority of North American's equipment much less substantially all of it. IPI also disputes the Hearing Examiner's reliance on the finding that three key management employees transferred from North American to IPI. According to IPI, there was no evidence below that two of these three employees were key management employees of either North American or IPI. Further, says IPI, this finding is irrelevant because nowhere does the statutory scheme differentiate key employees from regular employees. IPI also refutes the Hearing Examiner's dependence on several letters signed by Taylor in which he stated that IPI would continue the projects of North American using its personnel and equipment, and that he would assume its liabilities. According to IPI, Taylor's representations are legally insignificant because there is no statutory provision that makes the assumption of obligations legally relevant to the question of successor liability.
The crucial inquiry in determining whether IPI is the successor to North American for workers' compensation liability purposes is whether IPI acquired substantially all of North American's assets. It is not claimed that IPI acquired all of North American's assets. Therefore, under W.Va. Code § 23-2-14(b), IPI can be found to succeed to North American's liability only if IPI assumed substantially all of North American's assets.
This Court has held that [e]ach word of a statute should be given some effect and a statute must be construed in accordance with the import of its language. Undefined words and terms used in a legislative enactment will be given their common, ordinary and accepted meaning. Syllabus Point 6, in part, State ex rel. Cohen v. Manchin, 175 W.Va. 525, 336 S.E.2d 171 (1984). Several courts have defined the phrase substantially all. In Atmel Corp. v. Information Storage Devices, Inc., 997 F.Supp. 1210, 1229 (N.D.Cal. 1998), the court defined substantially all as used in a patent to mean all but an insignificant amount. Similarly, in Ahlstrom Machinery, Inc. v. Clement, 13 F.Supp.2d 45, 49 (D.D.C. 1998), affirmed, Kamyr, Inc. v. Clement, 217 F.3d 860 (Fed.Cir. 1999), the phrase substantially all, again as used in claim of patent, was construed to mean largely but not wholly that which is specified. We believe that the definition stated by the Atmel court as all but an insignificant amount both accurately and clearly expresses the common and ordinary meaning of the phrase substantially all. Accordingly, we hold that the phrase substantially all in W.Va. Code § 23-2-14(b) (2003), regarding the determination of successor liability under the Workers' Compensation Act, means all but an insignificant amount.
We note also that this definition is consistent with how the phrase substantially all has been applied by several courts in various contexts. See Continental Can v. Chicago Truck Drivers, et al., 916 F.2d 1154, 1158 (7th Cir. 1990) (noting that [a]ll of the [tax] regulations we could find . . . quantify this phrase [substantially all] as 85% or more); Central States, et al., Pension Fund v. Bellmont, 610 F.Supp. 1505, 1511 (N.D.Ind. 1985), affirmed, 788 F.2d 428 (7th Cir. 1986) (concluding that [t]he 85% figure . . . comports with the common meaning of 'substantially all' in a trucking industry exemption); Theurer v. Bd. of Review Indus. Com'n, 725 P.2d 1338 (Utah 1986) (holding that newly practicing dentist's acquisition of 75% of former dentist's assets is not substantially all assets of former dentist); James v. McCoy Mfg. Co., 431 So.2d 1147, 1149 (Ala. 1983) (concluding that 65% was insufficient to constitute substantially all the assets within context of unemployment statute for purposes of calculating corporation's contribution to state unemployment compensation fund); Auclair Transp. v. Riley, 96 N.H. 1, 69 A.2d 861, 863 (N.H. 1949) (finding that word substantially in unemployment compensation act cannot be less than 90% [of the whole] in the ordinary situation).
Application of the above definition of substantially all to the instant facts leads this Court to conclude that IPI did not acquire substantially all of North American's assets pursuant to W.Va. Code § 23-2-14. We recognize the Hearing Examiner's findings that IPI completed the only contract left uncompleted by North American and that Taylor on several occasions held IPI out to be North American's successor. Significantly, however, IPI did not acquire North American's real estate which was valued at approximately $125,000.00. Also, IPI acquired only three of the ten employees of North American, a number which certainly does not constitute substantially all of North American's employees. Further, as noted by IPI, even though the three employees acquired by IPI are characterized as key management employees by the Hearing Examiner, W.Va. Code § 23-2-14(e) does not distinguish between types of employees in its listing of categories of assets.
Finally, the Hearing Examiner found that IPI acquired a substantial portion of North American's equipment by comparing the list of equipment leased by IPI on Schedule A attached to the lease to the Division's Exhibit 14 which is a list of equipment owned by North American. However, as asserted by IPI, a substantial portion of the whole is not the same as substantially all of the whole. While a substantial portion may mean a majority of or most of, it does not necessarily indicate all but an insignificant amount. Schedule A, by this Court's count, lists approximately 115 sundry items used in offices or in the painting business acquired by IPI out of a total of approximately 182 such items owned by North American and listed on Exhibit 14. A comparison of the two lists appears to indicate, among other things, that IPI leased approximately seven trucks from North American, while approximately ten trucks were retained by North American. Also, several trailers, campers, and a boat owned by North American were not acquired by IPI. In addition, while IPI acquired six Louisville pick boards from North American, sixteen such pick boards were retained by North American along with all of North American's step and extension ladders. Moreover, while IPI acquired various pieces of office equipment such as
a computer hard drive, laser printer, office tables and chairs, typewriter, two office trailers, and a fax machine, it did not acquire phones, a copier, refrigerator, microwave, television, video cassette recorder, monitors, and key pads. This Court concludes from this that while, as found by the Hearing Examiner, IPI acquired a substantial portion of North American's equipment, it clearly did not assume all but an insignificant amount of the equipment.
The Division asserts that the applicable statute does not require that substantially all of each category of the assets owned by the predecessor employer be transferred. Rather, a sale of any of the assets shall be presumed to be substantially all of the assets if the transfer affects the employer's capacity to do business. In addition, says the Division, W.Va. Code § 23-2-14(e) provides that the types of assets listed are not inclusive. Therefore, the Division can consider all of the assets transferred within the totality of the circumstances in its successorship analysis. While these assertions are not necessarily incorrect, the fact remains that an employer can rebut a presumption of successorship by showing that it did not acquire or assume all or substantially all of the predecessor employer's assets. See Expedited Transp. Systems, Inc. v. Vieweg, 207 W.Va. 90, 529 S.E.2d 110 (2000) (holding that when presumption is used to find successor liability and employer requests a hearing to rebut the presumption, the Division must grant such a hearing). In the instant case, we find that IPI rebutted the presumption of successorship by showing that, although it may have acquired a substantial portion of North American's assets, it did not acquire all but an insignificant amount of the assets. Specifically, IPI did not acquire North American's real estate, or substantially all of North American's employees and equipment.
This Court has held that,
as to the meaning and application of workers' compensation statutes rendered
by the Workers' Compensation Commissioner, as the governmental official charged
with the administration and enforcement of the workers' compensation statutory
law of this State, pursuant to W.Va. Code § 23-1-1 (1997) (Repl.Vol. 1998),
should be accorded deference if such interpretations are consistent with the
legislation's plain meaning and ordinary construction.
Syllabus Point 4, State ex rel. ACF Industries v. Vieweg, 204 W.Va. 525, 514 S.E.2d 176 (1999). Thus, the Division's construction of W.Va. Code § 23-2-14 should only be accorded deference if it is consistent with that statute's plain meaning. We also have recognized that [t]he judiciary is the final authority on issues of statutory construction, and we are obliged to reject administrative constructions that are contrary to the clear language of a statute. Syllabus Point 5, CNG Transmission Corp. v. Craig, 211 W.Va. 170, 564 S.E.2d 167 (2002). In the instant case, we reject the Division's application of W.Va. Code § 23-2-14 to the instant facts as inconsistent with that statute's clear language. (See footnote 8)
we have determined that the substantially all test for successor
liability in W.Va. Code § 23-2-14 means all but an insignificant amount. The
application of this standard to the instant facts indicates that a significant
amount of North American's assets were not acquired by IPI including real estate,
employees, and equipment. Therefore, because IPI did not acquire substantially
all of North American's assets, it is not a successor employer to North American
pursuant to W.Va. Code § 23-2-14. Accordingly, the circuit court's order
that affirmed the ruling of the Commissioner and the Hearing Examiner that IPI
is a successor to North American is reversed. (See