The city of Cleveland’s claim that the Ohio Bureau of Workers’ Compensation (BWC) overcharged it millions of dollars in excessive premiums more than a decade ago must be filed in the Ohio Court of Claims, the Ohio Supreme Court ruled today.

In a 6-1 decision, the Supreme Court vacated a $4.5 million order of restitution granted to the city by a Cuyahoga County Common Pleas Court, which was affirmed by the Eighth District Court of Appeals. The Court did not address the merits of Cleveland’s claims, but adopted the BWC’s argument that only the Court of Claims has jurisdiction to consider the matter.

Writing for the Court majority, Chief Justice Maureen O’Connor stated that a lawsuit seeking restitution can be in either the form of a “legal” claim or an “equitable” claim. Based on a 2016 U.S. Supreme Court decision, when a restitution claim is essentially seeking money as damages, it is a legal claim, and only the Court of Claims can consider legal claims against the state, she wrote.

Justices Sharon L. Kennedy, Judith L. French, Patrick F. Fischer, R. Patrick DeWine, and Melody J. Stewart joined the chief justice’s opinion.

Justice Michael P. Donnelly dissented, stating that the majority brushed aside a 2004 Ohio Supreme Court decision that supported Cleveland’s right to file the case in Cuyahoga County. He wrote Cleveland’s action was an equitable action, and those can be filed in a county common pleas court.

Inflated Charges Lead to Lawsuit
Ohio requires public employers such as Cleveland, that are not self-insured, to contribute to the BWC’s public insurance fund. The premiums for all Ohio employers go into a single state insurance fund the agency uses to pay workers’ compensation benefits for work-related accidents.

The BWC generally determines how much an employer pays in premium based on the employer’s risk experience. In 1989, the legislature directed the BWC to develop and offer a group-rating plan, in addition to the existing individual-rated plans, that allowed employers to pool their risks and receive an experience rating based on the collective risk. The bureau acknowledged that during portions of the 1990s and 2000s, it was charging premiums to the group-rated employers that were not covering the losses attributable to claims from those employers. Cleveland alleged individually-rated employers were being unjustly charged increased rates to cover the shortages.

In 2013, the city sued the BWC in Cuyahoga County Common Pleas Court, claiming unjust enrichment by the bureau. Cleveland sought an order to “disgorge the amount of overpayment” from the BWC along with interest. The bureau sought to dismiss the case, arguing that while the city maintained it was seeking equitable relief, it was in fact seeking legal relief. The bureau asserted the common pleas court had no jurisdiction to hear the case, and that it could only be considered in the Court of Claims.

The trial court denied the BWC’s challenge and ruled in the city’s favor. It then conducted a bench trial on the amount of restitution the bureau owed the city. It found the city was owed $4,524,392 plus interest.

The Eighth District affirmed the decision, and BWC appealed to the Supreme Court, which agreed to hear the case.

Nature of Claim Examined
Chief Justice O’Connor explained that traditionally state agents, such as the BWC, were protected from lawsuits for wrongs committed in the course of official duties through the doctrine of sovereign immunity. In 1975, state lawmakers allowed lawsuits against the state and created the Court of Claims. The court was given exclusive jurisdiction over all civil actions against the state that were permitted by the state’s waiver of its immunity, and all legal claims against the state must be filed in it.

The doctrine of sovereign immunity never prevented equitable claims, and the Ohio Constitution grants common pleas courts jurisdiction to consider equitable claims, the opinion stated.

Cleveland sought restitution from BWC. The opinion explained that restitution can be either a legal or equitable claim depending on the nature of remedy sought. Historically, a “legal” claim for restitution held that a person could not recover ownership or possession of particular property and was entitled to receive money as a remedy. An “equitable” claim for restitution was one where property or money could be identified and clearly traced to particular funds or property in the defendant’s possession and then returned.

The opinion stated that in some cases the Court has considered restitution requests from the state to be equitable, including in its 2004 Santos v. Ohio Bur. Of Workers’ Comp decision. In that case, injured workers sought to recover money that the BWC collected from them as subrogation after the workers received awards in personal injury lawsuits. The Court determined the law the BWC cited to collect the funds was unconstitutional. Since the collection was unlawful, the Court ruled the injured workers’ case against the BWC was to correct the unjust enrichment of the bureau and to return the specific funds wrongfully collected.

Federal Ruling Influenced Analysis
The opinion stated that subsequent to the Court’s decision in Santos and other cases, the U.S. Supreme Court provided clear guidance on what constitutes equitable relief and legal relief in its 2016 Montanile v. Natl. Elevator Industry Health Benefit Plan Bd. Of Trustees decision. The decision found that if there is not a specifically identifiable fund, or traceable items to seize, then the plaintiff cannot make an equitable claim to receive restitution from the defendant’s general assets. Claims to recover from the general assets are legal claims, the Court explained.

BWC kept track of the amount Cleveland paid in premiums, but the city’s money went into a general insurance fund, and the payments were not kept separate from the payments made by other public employers, the opinion noted. The money became commingled with other premium payments.

“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,’” the opinion stated. “The money allegedly overpaid is no longer in the BWC’s possession and cannot be recovered by a suit in equity.”

Because the exact funds cannot be recovered, the claim against the bureau is a legal one that must be filed in the Court of Claims, the Court concluded. The Court vacated all trial court orders in the case and directed the trial court to dismiss the case.

Dissent Questions Need to Trace Funds
In a dissenting opinion, Justice Donnelly wrote the Court in Santos determined that when BWC unlawfully retains funds to which it is not entitled, the action to correct the unjust enrichment is an equitable claim for restitution. He wrote that Santos is still good law, and the Ohio Supreme Court has not overruled it.

Justice Donnelly wrote the majority gives too much importance to the need to trace money to a particular fund. He stated that most money in the modern age is not a physical thing, but “simply represented by numbers on a page, whether paper or electronic.”

“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 electronic transfer,” he wrote.

He stated that Cleveland is not making a legal claim for damages and “is not seeking one penny more than the $4,524,392, it was unlawfully overcharged.” Based on Santos, he concludes that Cleveland’s claim is an equitable one and he would affirm the trial court’s decision.

2018-0572. Cleveland v. Ohio Bureau of Workers’ Comp., Slip Opinion No. 2020-Ohio-337.

View oral argument video of this case.

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