Like many jurisdictions, Illinois provides that an employer/workers’ compensation carrier has a lien against any recovery an employee receives from a third party. While the same statutory scheme requires the employee and the employee’s attorney to protect that lien, there are certainly enough instances in which liens have been overlooked.
Fortunately, the Illinois Workers’ Compensation Act allows an employer/carrier to intervene in any related suit the employee may bring against third parties. This intervention is limited to joining the suit for the specific purpose of protecting the lien. Section 5(b) of the Illinois Workers’ Compensation Act provides:
If the injured employee or his personal representative agrees to receive compensation from the employer or accept from the employer any payment on account of such compensation, or to institute proceedings to recover the same, the employer may have or claim a lien upon any award, judgment, or fund out of which such employee might be compensated from such third party.
In such actions brought by the employee or his personal representative, he shall forthwith notify his employer by personal service or registered mail, of such fact and of the name of the court in which the suit is brought, filing proof thereof in the action. The employer may, at any time thereafter join in the action upon his motion so that all orders of court after hearing and judgment shall be made for his protection. No release or settlement of claim for damages by reason of such injury or death, and no satisfaction of judgment in such proceedings shall be valid without the written consent of both employer and employee or his personal representative, except in the case of the employer, such consent is not required where the employer has been fully indemnified or protected by Court order. 820 ILCS 305/5(b) (emphasis added).
Despite the clear language of the statute limiting the role of an employer/carrier as an intervenor, litigants and courts have construed the status of a workers’ compensation intervenor as a party for all purposes, including discovery. This construction has led to workers’ compensation carriers being pulled into the discovery process in third-party suits. Sometimes the compulsion is guided by the litigants seeking additional facts regarding the employer, the employee or the underlying incident. Sometimes, however, the compulsion is guided by the less noble desire to badger a workers’ compensation carrier into reducing or waiving its lien in order to avoid incurring the cost and inconvenience associated with participation in discovery.
In a case of first impression, the Illinois Appellate Court in Burdess v. Cottrell Inc., 2020 IL App (5th) 190279, held that the method and scope of discovery that can be employed with an intervening workers’ compensation carrier is restricted by §5 of the Workers’ Compensation Act and by the Illinois Code of Civil Procedure’s requirement that discovery must be proportional to the expected benefits derived from the discovery.
In Burdess, Continental Indemnity Company intervened in a civil action brought by Greg Burdess for injuries he sustained in the course of his employment. Continental’s petition to intervene only sought to require the parties to include Continental in all notices and to have the parties recognize and protect Continental’s workers’ compensation lien.
Shortly after the court granted Continental’s petition, Burdess issued interrogatories and a very lengthy request for production to Continental seeking, among other things, information regarding all other workers’ compensation claims that may have been made against Burdess’ employer for injuries occurring under similar circumstances; all files for all workers’ compensation claims ever made by Burdess; and even the identification of Continental’s control group.
Continental objected to the discovery requests on the grounds that interrogatories and document production requests were limited under the Illinois Code of Civil Procedure to “parties” and Continental was not a party. Notwithstanding this objection, Continental produced the non-privileged portions of Burdess’ workers’ compensation claim files.
Burdess then filed a motion to compel Continental to respond to all of the interrogatories and to provide all of the requested documents. The trial court granted the motion to compel, holding that because Continental had filed its appearance in the case, it was a party and was required to respond to the discovery requests.
Continental amended its discovery requests, again asserting that it was not a party and was not subject to the Illinois code provisions regarding interrogatories and document production requests. Continental otherwise responded to all interrogatories except the interrogatory asking for the identification of its control group. Continental also took issue with the document production requests identifying the non-privileged portions of Burdess’ claim files and request to produce a list of over 3,300 other claims made against Burdess’ employer.
Burdess filed a motion for discovery sanctions, arguing that the responses did not comply with the prior order to comply with all discovery requests, including the identification of all similar claims. The court agreed and ordered Continental to fully respond within 30 days or it would be sanctioned at the rate of $150 per day until it complied.
In order to seek an immediate appeal, Continental filed a motion asking the court to hold it in “friendly contempt” and to impose a token contempt penalty of $1 per day. The court agreed to hold Continental in contempt as requested, but refused to stay the accrual of $150 per day discovery sanction.
Continental perfected its appeal of the contempt order, giving the appellate court jurisdiction to determine whether the circuit court erred in its two underlying discovery orders. The sole issue raised by Continental was that it was not a party and should not have been ordered to respond to interrogatories and the document production request.
While that appeal was pending, Burdess issued a subpoena for the deposition of a corporate representative of Continental. The subpoena also directed the representative to produce every document previously requested in the document production request.
Continental filed a motion to quash, acknowledging that it was subject to being deposed and could be required to produce records in conjunction with that deposition, but arguing that the records sought in the subpoena were not relevant and that the expense associated with identifying and producing information from 3,300 claim files would be disproportionate to the value such records might have to the case.
The circuit court denied the motion to quash, and at the request of Continental, issued an order of friendly contempt containing a monetary penalty of $25.
Continental appealed the denial of its motion to quash and the appellate court consolidated the two appeals.
Intervening Workers’ Compensation Carriers Are Not Parties
Initially, the appellate court noted that intervention under §5(b) of the Workers’ Compensation Act was limited to making sure that the workers’ compensation lien was protected. In this regard, the statutory right to intervene was much narrower and more specific than the general right of intervention under §2-408 of the Illinois Code of Civil Procedure which gives an intervenor all rights held by an original party. The court opined that where intervention is based on a specific statute, that statute—and not §2-408—controlled the conditions limiting the scope of intervention.
Turning to §5(b), the court observed that under prior court decisions interpreting intervention under §5(b), an employer could not participate in trial without the consent of the plaintiff. Section 5(b) has to be interpreted as more limited than intervention under §2-408 under which the right to participate as a party does not hinge on plaintiff’s consent.
Finally, the court noted that the fact that §5(b) does not require intervention in order for a lien to be protected, demonstrates that employers were not intended to be parties in third-party actions brought by employees. Otherwise, the Act would require employers to intervene in order to preserve their liens.
Determining that Continental was not a party by virtue of its status as an intervenor, the court held that the discovery mechanisms employed by Burdess were improper. Rules 213 and 214 that govern these discovery tools specifically state that they are to be issued by one party to another party. Nonparties are not within the scope of either discovery method. As such, the circuit court erred in entering the two discovery orders and the first contempt order against Continental.
Subpoenas Issued to Workers’ Compensation Carriers are Subject to the Requirement of Proportionality
The appellate court then turned its attention to the circuit court’s denial of Continental’s motion to quash the deposition subpoena and the rider seeking information regarding all other workers’ compensation claims that may have been made against Burdess’ employer for injuries occurring under similar circumstances.
In language that will serve employers and carriers well when confronted with record subpoenas, the court stated: “[P]laintiffs are not permitted to transmute their subpoena requests into a fishing expedition, especially in light of the unrebutted evidence of the burden associated with accommodating the request and considering [the carrier’s] nonparty status.”
Continental objected to the subpoena on the ground that compliance was disproportionate to the issues in the case. Illinois Supreme Court Rule 201(d)(3) provides that a court may curtail discovery that is disproportionate if it determines that:
The likely burden or expense of the proposed discovery, including electronically stored information, outweighs the likely benefit, taking into account the amount in controversy, the resources of the parties, the importance of the issues in the litigation, and the importance of the requested discovery in resolving the issues.
The appellate court held that even if the information sought through subpoena is relevant to any issues in the case, the subpoena may, nonetheless, be objectionable if the production would be disproportionate in terms of the burden and expense of complying.
The court held that requiring Continental to produce or comb through 3,300 claim files was clearly disproportionate considering the factors under Rule 201(d)(3). The court observed that the $200,000 Continental would expend was disproportionate to the $128,897 lien Continental intervened to protect. The court also weighed the fact that Continental was not a party as a factor against compliance with the subpoena.
Finally, the court agreed with Continental’s argument that the value of additional evidence of similar injuries that Burdess hoped to find in its 3,300 files was minimal given that Burdess already possessed evidence of similar injuries from other sources.
Burdess will be a valuable precedent for employers and carriers in third-party civil suits brought by employees. Not only does the decision clearly stand as precedent that an employer/carrier does not open itself up to being considered a party for purposes of discovery, but also it stands as precedent that the proportionality limitation on discovery under Rule 201(d)(3) is well-suited as a basis for objecting to abusive subpoenas directed to employers and carriers.