Free Motion for Reconsideration - District Court of Colorado - Colorado

Case 1:01-cv-02199-MSK-MEH

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Filed 07/18/2005

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IN THE UNITED STATES DISTRICT COURT FOR THE D ISTRICT O F COLORADO Civil Action No. 01-MK-2199 (OES) MICHAEL E. CLAWSON and JARED L. DILLON, Plaintiffs, vs. MOUNTAIN COAL COMPANY, L.L.C., ARCH WESTERN RESOURCES, L.L.C., and ARCH COAL, INC. Defendants.

DEFENDANTS' MOTION FOR PARTIAL RECONSIDERATION OF THE COURT'S ORDER REGARDING COLLATERAL SOURCES

Pursuant to the Court's Order Regarding Motion to Substitute Redacted Exhibits, dated July 14, 2005, Defendants hereby refile their motion for partial reconsideration of the May 3, 2005 Order to the extent the Order excluded presentation of evidence of short-term disability benefits to the jury at the trial of this matter. As noted by Plaintiffs in their Motion for Clarification or Partial Reconsideration of the May 3, 2005 Order on Docket No. 293 Regarding Collateral Sources ("Plaintiffs' Motion") at 5, the Court's ruling on May 3, 2005, that the jury will provide an advisory verdict on back pay, had not been previously considered or addressed by the parties in the prior pleadings on these issues. As set forth in the Pretrial Order at 37, the parties understood that it would be the Court who would determine any award of back and front pay to Plaintiffs, without input from the jury. As a result of the Court's Order stating that the jury will provide an advisory verdict on back pay

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and the Court's reservation of a ruling on collateral sources until a hearing post- verdict, Defendants move for reconsideration of the Court's Order excluding amounts of short-term disability ("STD") benefits received. The bases for such motion are that (1) STD benefits are not a collateral source and (2) because such benefits were paid by Defendants in the same manner as wages and the amounts appear on the W-2s received from Defendants as wages, it is difficult to exclude such amounts from the evidence presented to the jury relating to back pay damages (as opposed to amounts received from third parties, such as workers' compensation, LTD, and unemployment). Pursuant to D.C.COLO.LCivR 7.1, counsel for Defendants conferred with counsel for Plaintiffs regarding the subject of this motion. By letter dated July 5, 2005, Plaintiffs stated that they oppose the relief sought herein. I. STD Benefits Are Not Paid by a Collateral Source. Because STD payments were made directly by Defendants to Plaintiffs, they simply do not fall within any arguable definition of a collateral source. In an analogous situation, the Tenth Circuit found that a back pay award should be offset by severance paid wholly by the allegedly discriminating employer because it was not an amount that came from a third person (i.e., a collateral source). EEOC v. Sandia Corp., 639 F.2d 600, 626-27 (10th Cir. 1980). See also Flowers v. Komatsu Mining Systems, Inc., 165 F.3d 554, 558 (7th Cir. 1999) ("In an employment case, if the employer is the source of the funds at issue, then the payments can be deducted from the award."); Smith v. Office of Personnel Mgmt., 778 F.2d 258, 263 (5th Cir. 1985) (collateral source rule does not apply when the "collateral source" is the defendant). As the STD plan clearly states, "STD benefits are paid directly by the Company, as opposed to being insured," meaning that all STD payments come directly from Defendants.

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Summary Plan Description of Disability Benefits, dated January 1999, ("SPD") at 1, attached hereto as Exhibit A. There is no third-party insurer, only a third party who administers claims for STD. Id. Employees of Mountain Coal do not purchase STD ins urance or contribute to any premiums, since there are none. Id. In accordance with such policy, STD benefits were paid to Plaintiffs directly by Defendants, as wage continuation while they were still employed, but unable to work. Because they were paid directly by Defendants, they are not reported in a separate W-2, but rather appear as part of the wages earned by Plaintiffs and reported to the IRS on the form W-2 provided by Defendants. See Dillon 1999 W-2 from Arch Western Resources reflecting $13,919.79 in box 1 (which includes wages and amounts received as STD), attached as Exhibit B. In fact, the payroll records for Plaintiffs reflect amounts earned for hours worked and amounts paid due to occupational injury, with checks being issued the same way, regardless of whether such amounts were for wages earned through hours worked or STD. See, e.g., wage statement for Clawson for the period ending 5/23/99 showing regular pay of $620.00 and occupational injury pay of $900, attached as Exhibit C. See also wage statement for Clawson from July 4, 1999 showing occupational injury pay of $1,600 charged to MCC General Production, attached as Exhibit D. II. Excluding STD Benefits Is Not as Simple as Excluding Amounts Paid by Third Parties. Amounts received from une mployment, workers' compensation, and long-term disability ("LTD") are separately set out and were paid by sources other than Defendant, and, therefore, may be easily identified through a review of tax and other records and excluded. However, it is not as simple or evident to calculate and exclude STD benefits, while still including other

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payments from Defendants, such as holiday pay. This is clearly illustrated by a review of the effort made by Plaintiffs' expert to do so. Plaintiffs' damages expert, Ron Brennan, started calculating damages for Plaintiffs as of the date each reached maximum medical improvement ("MMI"). See Brennan Economic Damages Reports for Dillon and Clawson, attached as Exhibits E & F respectively. In fact, Dillon received his STD benefits prior to reaching MMI on November 17, 1999. See Exhibit G (letter, dated 12/3/99, from Langrand to Dillon terminating STD benefits effective 11/14/1999). For Dillon, Brennan calculates damages from November 18, 1999 forward, excluding from actual earnings any amounts received from Defendants after such date. See Exhibit E at 2. Since Brennan's damages calculation for Dillon does not take into account the period when STD was paid to Dillon, he does not attempt to extract the amount of STD received by Dillon from Defendants. However, Dillon was not terminated until January 24, 2000 and, in December 1999, he received vacation and holiday pay, which clearly are not a collateral source. See Exhibit H at 10-12 (MCC 1948-1950). Yet, Brennan excludes these amounts. See Exhibit E at 2. Therefore, the assumption made by Plaintiffs and their expert that any amount received directly from Defendants after MMI constitutes STD benefits and is thus a collateral source is clearly erroneous. This mistake shows the difficulty in calculating the back pay damages when attempting to exclude amounts paid directly by Defendants, whether earned wages or interim wages through STD. With respect to Clawson, the issue is even more complicated. Clawson reached MMI on May 12, 1999. Thereafter, he began receiving STD benefits and continued to receive them for 26 weeks, or November 1999. Brennan calculates damages from May 14, 1999 forward.

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Exhibit F at 2. He excludes from Clawson's actual earnings all amounts, in salary or benefits, received from Defendants after May 14, 1999, again, assuming that all such amounts constituted STD benefits. Id. Again, such is not the case. Clawson continued to be employed by Mountain Coal during this period, receiving his usual benefits. Exhibit I at 1 (5.a.001). Furthermore, Clawson's dental and vision benefits were not terminated until February 1, 2000. See, e.g., Notification of COBRA Qualifying Event, attached as Exhibit J. Notably, his health and life insurance benefits were continued by Defendants until Provident made a decision regarding his eligibility for LTD benefits. See Exhibit I at 1. Finally, when he was terminated as of February 1, 2000, Clawson received additional payment for items such as accrued vacation. Exhibit K. In sum, because STD benefits were paid directly by Defendants and, thus, are not truly a collateral source, it is impractical, confusing, misleading, and frankly, artificial, to attempt to exclude such amounts from Plaintiffs' actual earnings and benefits during the back pay period, especially in the manner in which Plaintiffs, through their expert witness, Brennan, have done so. III. CONCLUSION Thus, for the reasons stated above, Defendants respectfully request that this Court enter an order finding that STD benefits are not a collateral source and allowing evidence relating to the STD policy and the amounts received by Plaintiffs from STD to be presented to the jury at the trial of this matter.

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Dated: July 18, 2005. Respectfully submitted,

s/Monique A. Tuttle Jeffrey T. Johnson Monique A. Tuttle HOLLAND & HART LLP 555 Seventeenth Street, Ste. 3200 Post Office Box 8749 Denver, Colorado 80201 Telephone: (303) 295-8000 Facsimile: (303) 295-8261 E- mail: [email protected] [email protected] ATTORNEYS FOR DEFENDANTS

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CERTIFICATE OF SERVICE (CM/ECF)

I hereby certify that on July 18, 2005, I electronically filed the foregoing with the Clerk of Court using the CM/ECF system which will send notification of such filing to the following e- mail addresses: [email protected] [email protected] I am not aware of any non CM/ECF participants in this matter requiring service by other means.

s/Monique A. Tuttle Monique A. Tuttle Attorneys for Defendants HOLLAND & HART LLP 555 Seventeenth Street, Ste. 3200 Post Office Box 8749 Denver, Colorado 80201 Telephone: (303) 295-8000 Facsimile: (303) 295-8261 E- mail: [email protected]

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