E-Alert Case Updates

Fourth Circuit Affirms District Court’s Decision That Virginia Workers’ Compensation Act Barred Personal Injury Suit by Construction Worker Employed by North Carolina Company

James Demetres v. East West Construction, Inc.
United States Court of Appeals for the Fourth Circuit, No. 14-1150 (4th Cir. January 15, 2015)
by Jhanelle A. Graham, Associate
Semmes, Bowen & Semmes (www.semmes.com)

Available at: http://www.ca4.uscourts.gov/Opinions/Published/141180.P.pdf

In James Demetres v. East West Construction, Inc., James Thomas Demetres (“Demetres”) appealed the district court’s dismissal of his personal injury suit against East West Construction, Inc. (“East West”) for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1). After reviewing the facts of the case and relevant case law, the Fourth Circuit affirmed the judgment of the district court.

Demetres was a resident and citizen of North Carolina, who was employed by Ashland Construction Co. (“Ashland”), a North Carolina corporation. East West was a Virginia corporation. In March of 2011, Ashland hired East West as a subcontractor to prepare a site in Virginia Beach for construction of a CVS Pharmacy, and designated Demetres as the superintendent. At the jobsite on March 28, 2011, a bulldozer, which was operated by an employee of East West, backed over Demetres, resulting in significant injuries. Demetres subsequently received workers’ compensation benefits under North Carolina law through his employer, Ashland. On March 27, 2013, Demetres also filed a third-party personal injury suit against East West in the Eastern District of Virginia, alleging negligence and seeking $100,000,000.00 in damages. East West filed a motion to dismiss for lack of subject matter jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(1). It argued that the exclusivity and statutory employer provisions of the Virginia Workers’ Compensation Act (“VWCA”), Va. Code Ann. § 65.2-307, barred Demetres’s personal injury suit. The district court, relying largely on the Fourth Circuit’s decision in Garcia v. Pittsylvania County Service Authority, 845 F.2d 465 (4th Cir. 1988), granted East West’s motion and dismissed the suit. Demetres timely appealed.

On appeal, Demetres argued that (1) the Full Faith and Credit Clause requires Virginia to defer to the law of North Carolina, the state that paid him benefits, in determining whether his suit was barred; and (2) the Supreme Court of Virginia precedent allows Virginia to apply the law of the state that paid benefits, even if the injury occurred in Virginia. First, the Fourth Circuit noted that because the action was one of diversity, the district court, sitting in Virginia, was required to apply Virginia law. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97 (1941). Virginia subscribes to the lex loci delicti principle for determining the applicable substantive law in tort suits. Jones v. R.S. Jones & Assocs., Inc., 431 S.E.2d 33, 34 (Va. 1993). According to that principle, the law of the place in which the injury occurred—i.e., Virginia—governed the substantive cause of action.

The appellate court opined that an injured employee who is covered by the VWCA is barred from suing his employer in tort for injuries “arising out of and in the course of the injured employee’s employment.” See, e.g., Simms v. Ruby Tuesday, Inc., 704 S.E.2d 359, 362 (Va. 2011). Further, the Supreme Court of Virginia has interpreted the VWCA as barring suits where, as here, injured employees of a general contractor attempt to sue a subcontractor who was engaged in the general contractor’s “trade, business or occupation.” See, e.g., David White Crane Serv. v. Howell, 714 S.E.2d 572, 575 (Va. 2011). Thus, the Fourth Circuit noted that notwithstanding its own view of the statutory text, when interpreting state law, the Fourth Circuit is obligated to defer to the state’s highest court. Based on the facts, the appellate court determined that East West, a construction subcontractor preparing a worksite for Ashland, was clearly engaged in the same “trade, business or occupation” as Ashland. East West was therefore a statutory co-employee of Demetres under Supreme Court of Virginia precedent. Thus, if the VWCA applied to Demetres’s claim, his suit would be barred.

Citing Garcia, the Fourth Circuit reiterated the lower court’s determination that Virginia was not required to relax its more restrictive workers’ compensation bar to hear a suit permitted under the laws of North Carolina. The appellate court agreed that Garcia foreclosed Demetres’s claim, as the district court opined in Demetres v. E.W. Constr. Co., 995 F. Supp. 2d 539, 544 (E.D. Va. 2014) (relying on Virginia case law to conclude that Demetres’s “tort suit is barred [in Virginia]”). Adhering to Garcia, the Fourth Circuit therefore concluded that Demetres’s claim was barred by the VWCA. Alternatively, the Court stated that even if it were to agree with Demetres that the analysis in Garcia was faulty, the Fourth Circuit was “powerless as a panel to overrule it.” Rather, only the full court, sitting en banc, can overrule a panel decision. The Court stated, therefore, that “for the time being, [the Court] must follow the panel decision” in Garcia and hold that, because Demetres’s injury occurred in Virginia and East West is a statutory co-employee under Virginia law, Demetres’s personal injury action was barred by the VWCA.