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Morris James LLP v. Weller

Superior Court of Delaware

March 29, 2018

MORRIS JAMES L, Appellant,
v.
WILLIAM WELLER, Appellee.

          Submitted: December 11, 2017

         On Appeal from the Industrial Accident Board: REVERSED.

          Scott R. Mondell, Esquire; Elissa A. Greenberg, Esquire; Elzufon Austin Tarlov & Mondell, PA, Attorney for Appellant Morris James LLP.

          Gary S. Nitsche, Esquire; William R. Stewart, Esquire; Weik, Nitsche & Dougherty, Attorneys for Appellee William Weller.

          OPINION AND ORDER

          FERRIS W. WHARTON, JUDGE.

         I. INTRODUCTION

         The Court revisits this case on appeal after remand. Morris James LLP ("Morris James") appeals the second decision of the Industrial Accident Board ("Board") dated August 1, 2017. Morris James contends that the Board erred when it found that Appellee William Weller's ("Weller") injury, which he sustained while playing on an employee softball team, occurred within the course and scope of employment. It also argues that the Board erred when it allowed Weller to present new evidence outside the scope of the remand proceeding. This Court reversed the Board's initial decision and remanded the matter to the Board to apply the correct legal standard to its factual findings and to take into account the appropriate considerations when determining whether Morris James received a substantial, direct benefit from having a softball team.

         In this appeal, the Court must determine whether the Board's decision is supported by substantial evidence and free from legal error. Upon consideration of the pleadings before the Court and the record below, the Court finds that the Board's decision is neither supported by substantial evidence, nor free from legal error. Accordingly, the Board's decision is REVERSED.

         II. FACTUAL AND PROCEDURAL CONTEXT[1]

         On May 25, 2017, prior to the remand hearing, Morris James moved in limine to limit the remand hearing to what it argued was the specific, problematic issue addressed in this Court's decision: whether Morris James derived a substantial benefit from the softball team.[2] According to Morris James, new evidence or witness testimony should be restricted to that issue only.[3] Weller responded that he was entitled to introduce new evidence because the entire case was remanded and application of the correct legal test required analysis of all factors.[4] The Board initially disagreed with Weller, finding that a party's ability to introduce new evidence at a remand hearing is limited to those issues identified as error or problematic by the appellate court.[5] The Board concluded that the specific issue on remand was whether the Morris James derived a substantial benefit from the softball team.[6]

         The Board held the remand hearing on May 31, 2017.[7] At the start of the proceedings Weller moved to re-argue the limiting order.[8] Weller argued that the language of the Court required the Board to apply "the Dalton factors, not factor."[9]Therefore, new evidence and witnesses could be offered on all pertinent factors. Morris James maintained its previous position that remand was limited to the problematic issue identified by the Court.[10] The Board reversed itself and allowed Weller's new evidence and witnesses, but noted that the substantial benefit factor was the "key factor that the judge wanted [the Board] to look at" among all the Dalton factors.[11]

         Teresa Atwell ("Atwell"), an employee in Morris James' Accounting Department, testified at the remand hearing.[12] She stated that she was injured twice while playing softball for Morris James.[13] In each instance she was told by Morris James to submit her claim under workers' compensation, and in both times her claim was accepted.[14] Atwell also testified that she felt pressured to play softball.[15] In order to field a team for a game each team needed to have three female players.[16]As there were not many female players she felt obligated to play and, after agreeing to play, was told she needed to be there on occasion.[17]

         Jamie Dawson ("Dawson"), a paralegal at Morris James, confirmed coverage of Atwell's injuries under workers' compensation.[18] She also testified to the pressure she felt to play softball.[19] Dawson stated that she would be "haggled" by her supervisors at work if she did not participate, [20] and that pressure to play came from as high up as the Executive Director Herweg.[21] The pressure to play was a reason she no longer participated.[22]

         Eric Monzo ("Monzo"), an equity partner at Morris James in Weller's department, testified at the remand hearing before the Board.[23] Mr. Monzo stated that employees were encouraged to play softball.[24] He further added that during job interviews he inquired whether a candidate played softball.[25] Monzo also testified about the benefit to the Morris James. He believed that the softball games fostered strong relationships within the legal community and were a beneficial form of social engagement.[26] However, Monzo did not believe Morris James benefitted economically, through new clients or new business, from the softball games.[27]

         Sherry Perna ("Perna"), Morris James' Executive Director, Controller, and softball coach, testified that she regularly encouraged softball participation.[28] She sent a firm-wide e-mail gauging interest at the beginning of each season, [29] ensured there was enough people to field a team for each game, [30] and inquired whether job candidates played softball.[31] Perna also testified that the softball events benefitted Morris James as a team building exercise, "it helps people get together" and "learn about other people that they work with."[32] Other than increased morale, Perna did not believe Morris James received any other benefit from the softball team.[33]Additionally, Perna testified that Morris James allows non-employees to play on the team, including other attorneys and vendors.[34]

         On August 1, 2017, the Board issued a new decision concluding that Weller's injury occurred in the course and scope of his employment.[35] The decision found that Weller met his burden of proof by establishing the second and third factors of the Dalton standard, which are:

(2) the employer, by expressly or impliedly requiring participation, or by making the activity part of the services of the employee, brings the activity within the orbit of employment and (3) the employer derives substantial direct benefit from the activity beyond the intangible value of improvement in employee health and morale that is common to all kinds of recreation and social life.[36]

         As to the second Dalton factor, the Board found that "there was sufficient evidence to show there was pressure put on employees to play that by implication [softball] was an employee related activity"[37] The Board reasoned that: (1) pressure was put on members of the team to play and for certain employees to join the team, (2) Morris James asked job applicants whether they played softball, (3) Morris James told an injured employee to submit a workers' compensation claims for two prior softball injuries and both claims were accepted, and (4) Morris James told Weller to submit a workers' compensation claim.[38] By taking these actions, the Board concluded that Morris James brought "participation in the softball team within the sphere of employment related activity."[39]

         Regarding the third Dalton factor, the Board held that Morris James met the third prong because it derived a substantial and direct benefit from the softball team.[40] In reaching its conclusion the Board relied on: (1) the testimony of Herweg, Morris James' Executive Director, that Morris James "realized a benefit in the form of increased productivity"; and (2) the fact that the Morris James allows non-employees, such as vendors, to play on the team and "several vendors on the team can provide a business benefit for the firm."[41]

         III. THE PARTIES CONTENTIONS

         On appeal, Morris James argues that the Board's decision should be reversed for three reasons. First, Morris James argues that the Board erred by considering new evidence on factual issues which were not appealed.[42] According to Morris James, the scope of issues to be addressed during a remanded hearing is limited to the issues raised on appeal.[43] In its first appeal Morris James challenged: (1) whether the Board applied the proper legal standard;[44] (2) whether a standard-use-of-premises or "Hold Harmless" contract demonstrated a modicum of Morris James' control over the recreational event;[45] and (3) whether there were sufficient facts to demonstrate Morris James derived a benefit in the form of increased employee productivity from its employees' participation in softball.[46] Therefore, the scope of the remand hearing should have been limited to applying the correct legal framework to the previously litigated facts and only considering new evidence related to the appealed issues (the "Hold Harmless" contract and whether there was any employer-derived benefit.)[47]

         Second, Morris James argues that the Board erred when it concluded that Weller met his burden to show an employer-based benefit from the softball team.[48]In reaching its conclusion the Board relied on Herweg's prior testimony about productivity and evidence of non-employee vendor participation. According to Morris James, the Board's continued reliance on Herweg's productivity testimony contravened this Court's previous admonition to disregard it and, further, such evidence failed to demonstrate a direct and tangible benefit.[49] Morris James also contends that mere evidence of non-employee vendor participation, without more, is insufficient to demonstrate any substantial, direct benefit to Morris James.[50]

         Third, the Board erred in concluding that Morris James took action to bring softball participation within the sphere of "employment related activity." In particular, the Board relied on: (1) the fact that Weller was told to submit a workers' compensation claim, (2) prior softball injury claims by Morris James' employees were covered under workers' compensation, and (3) pressure was put on members of the team to play. Morris James argues that the Board erred in relying on prior workers' compensation coverage because prior coverage was due to its prior insurance carrier's errors and Morris James should not be bound by those mistakes.[51]Morris James also argues that its instructions to report softball injuries were statutorily obligated and therefore did not expand the scope of Morris James' employees' services.[52] Lastly, Morris James contends that the Board's reliance on subjectively-felt pressure was insufficient to meet Dalton 's second factor because softball participation was optional and evidence of subjective pressure is distinguishable from required participation.[53]

         In response, Weller argues that the Board correctly considered new evidence at the remand hearing.[54] According to Weller the scope of the remand hearing relates to the issues on appeal and remand: whether softball was a work-related activity at the time of Weller's injury and correct application of the Dalton factors.[55] Weller contends that the new testimony dealt with the second and third Dalton factors.[56]Therefore, according to Weller, because the Dalton test and whether his injury was work-related were the issues on remand, evidence-including new evidence-on those issues was well within the scope of the remand hearing.[57] Weller also asserts that the Board's decision was supported by substantial evidence and free from legal error.[58]

         IV. STANDARD OF REVIEW

         The Board's decision must be affirmed so long as it is supported by substantial evidence and is free from legal error.[59] Substantial evidence is that which a reasonable mind might accept as adequate to support a conclusion.[60] While a preponderance of evidence is not necessary, substantial evidence means "more than a mere scintilla."[61] Questions of law are reviewed de novo, [62] but because the Court does not weigh evidence, determine questions of credibility, or make its own factual findings, [63] it must uphold the decision of the Board unless the Court finds that the Board's decision "exceeds the bounds of reason given the circumstances."[64]

         V. DISCUSSION

         I. THE BOARD CORRECTLY CONSIDERED NEW EVIDENCE AT THE REMAND HEARING.

         The Delaware Workers' Compensation Statute states "[i]n case any cause shall be remanded to the Board for a rehearing, the procedure and the rights of all parties to such cause shall be the same as in the case of the original hearing before the board."[65] Thus, it appears on remand of a workers' compensation claim that all evidence previously taken becomes part of the record on remand, and that the parties may augment that record by offering additional evidence or legal argument.[66] The Court in State v. Steen found similarly, stating "the statutory scheme for conducting a hearing on remand is unambiguous. The Board is to decide the matter, after the remand hearing, on the basis of the evidence from the prior hearing plus any new evidence and legal arguments the parties decide to present."[67] The scope of evidence properly presentable on remand was then narrowed by Johnson Control, Inc. v. Haines.[68] There the Superior Court held, "Steen does not require the Board to hear the entire case anew on remand, but rather, allows the parties to revisit the issue identified by this Court as problematic."[69] Therefore, the Court concludes that on remand parties are entitled to introduce new evidence and new legal argument with respect to the issue identified as "problematic."

         Here, the problematic issue was the application of the Dalton factors. This Court previously stated "the Court remands this case to the Board for it to apply the Dalton factors, " and "[o]n remand, the Board shall take these considerations into account when it applies the Dalton factors."[70] The Court identified the problematic issue. Therefore, the Board correctly considered new evidence on the Dalton factors.

         Morris James contends that Blue Hen Lines, Inc. v. Turbitt limits the scope of the remand hearing to the issues on appeal.[71] As a result, the Board was restricted to: (1) applying the correct legal framework to the previously litigated facts; and (2) considering new evidence related to the appealed facts.[72] However, Morris James's reasoning and reliance on Turbitt is misplaced. The natural consequence of Morris James's formulation would be to require a prevailing party to appeal all of the issues on which it was unsuccessful even though the overall outcome was favorable to it. Moreover, the weight of case law suggests a broader scope of the hearing on remand. To the extent there was any uncertainty in the scope of the hearing on remand, the Court finds it was properly resolved by the Board in favor of allowing the Weller to present additional evidence and legal argument.[73]

         II. THE BOARD'S CONLCUSION THAT MORRIS JAMES DERIVED A SUBSTANTIAL BENEFIT FROM SOFTBALL IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE.

         In determining whether an injury at a non-company sponsored recreational event occurred within the course and scope of employment the standard set out by the court in Dalton is disjunctive. A claimant need satisfy only one of the three Dalton factors to find an activity within the course and scope of employment.[74] The third Dalton factor evaluates whether "the employer derives substantial direct benefit from the activity beyond the intangible value of improvement in employee health and morale that is common to all kinds of recreation and social life."[75]

         This Court noted, with particularity, that the weight of authority holds that intangible benefits alone are not enough to bring a recreational event within the course and scope of one's employment.[76] A "direct benefit" to an employer in a social context generally includes "the benefit a business gains from having its employees entertain clients, the participation of employees in business-related clubs and organizations or social activities ......"[77] In the context of a recreational event, such as a softball game, a "direct benefit" to an employer includes business advertising, publicity, and monetary gain.[78] It is that kind of direct, substantial, and tangible benefit that Dalton requires.

         The Board concluded that Morris James derived a "substantial direct benefit" from the softball team in the form of increased productivity.[79] In its decision, the Board cited Herweg's testimony "that [Morris James] realized a benefit in the form of increased productivity, " and that it relied "on his representation as an officer of the firm."[80] Such enhanced productivity is a consequence of the increased morale, camaraderie, and health of the employees resulting from participating on the softball team and is the very type of benefit this Court admonished the Board to disregard.[81]Enhanced morale and health are the exact benefits Dalton and the majority of courts have deemed insufficient to demonstrate a substantial, direct benefit to an employer.[82] Dalton requires "substantial direct benefit from the activity beyond the intangible value of improvement in employee health and morale."[83] Furthermore, this form of enhanced productivity is unlike the business-specific benefit described in Dalton. Morris James is a law firm; its goal is to bring in legal business. Morris James derives no business benefit by having Weller participate in softball. Morris James does not advertise its legal services at games, its clientele does not attend or participate at games, and softball has no beneficial monetary impact on the firm.

         There are other problems with the Board's reliance on this snippet of Herweg's testimony. The first is that it ignores its context. That context is:

MR. GROUNDLAND: Mr. Weller [sic], do you believe that enhancing morale, enhancing camaraderie, enhancing good will, all those three things combined, would enhance ultimate productivity for the firm?
THE WITNESS: Yes.
MR. GROUNDLAND: Would it enhance productivity?
THE WITNESS: It would. I mean that's the goal, that's the hope of it. It's the attitude that I've tried to foster since I've been there.[84]

         When viewed in its proper context, Mr. Herweg's testimony was clearly referring to those intangible benefits that improved morale, camaraderie and good will provide, in other words, the very considerations the Court cautioned the Board against taking into account. The second problem is that the Board failed to cite any evidence that this productivity benefit is "substantial." At best, it is aspirational, as evidenced by Mr. Herweg's qualifying comments that enhanced productivity was his "goal" or "the hope of it." There is no evidence that his "goal" or "hope" ever was realized in fact. The final problem is that the Board ignored Mr. Herweg's more extensive testimony on the actual considerations the Board was to take into account regarding productivity. That testimony was:

Q. What benefit does Morris James derive from supporting these games?
A. I think it's just morale, camaraderie, there's some exercise, promote health. But we get so many people that aren't playing that just go because it is a fun event to be at.
Q. And when you refer to employee health, does that include mental health?
A. Mental health, physical health, get out of the office, clear your brain, don't worry about the case tomorrow for two hours, and just have some fun, you can relax a bit.
Q. Is there any other benefit the firm derives from these games?
A. I mean, not that I'm aware of.
Q. Has the firm ever used the softball games as a means by which to solicit business?
A. No.
Q. Do any of the firm's clients or prospective clients ...

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