Benefit-Review Agreement – Mental Capacity to Contract

Ex parte American Cast Iron Pipe Company, [Ms. 1200500, Sep. 23, 2022] __ So. 3d __ (Ala. 2022). In a plurality opinion, the Court (Stewart, J.; Parker, C.J., and Mitchell, J., concur; Shaw and Mendheim, JJ., concur in the result; Bolin and Bryan, JJ., dissent; Sellers, J., dissents, with opinion; Wise, J., recuses) affirms the Court of Civil Appeals holding that a benefit-review agreement entered into pursuant to the Workers’ Compensation Act Ombudsman program may be declared void ab initio on the basis of a signatory’s mental incompetency even though the action challenging the agreement is not commenced within the 60-day period set forth in § 25-5-292(b), Ala. Code 1975.

The statute provides in pertinent part that “(b) An agreement signed pursuant to this section shall be binding on all parties through the final conclusion of all matters relating to the claim, unless within 60 days after the agreement is signed or approved the court on a finding of fraud, newly discovered evidence, or other good cause, shall relieve all parties of the effect of the agreement.”

The opinion notes

The legislature did not define the terms “agreement” or “settlement” for the purposes of the ombudsman-program article. A fundamental principle of statutory construction is that “‘[w]hen a term is not defined in a statute, the commonly accepted definition of the term should be applied.’” Ex parte Gadsden Reg’l Med. Ctr., 904 So. 2d 234, 236 (Ala. 2004) (quoting Bean Dredging, L.L.C. v. Alabama Dep’t of Revenue, 855 So. 2d 513, 517 (Ala. 2003)); see Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts § 6 at 70 (Thomson/West 2012) (“One should assume the contextually appropriate ordinary meaning unless there is reason to think otherwise.”). This Court, moreover, often looks to dictionaries for the commonly accepted meaning of statutory language. See Ex parte Christopher, 145 So. 3d 60, 64 (Ala. 2013) (“The ‘plain and ordinary meaning’ of statutory language may often be found in a dictionary.”).

Ms. **12-13.

The opinion reasons that the commonly understood meaning of “agreement” as used in § 25-5-292, “requires the signatories to a written benefit-review agreement at least be capable of reaching a mutual understanding.” Ms. **13-14. Accordingly, “[t]he plain meaning of § 25-5-292 therefore requires this Court to conclude that, because the 60-day period in § 25-5-292(b) applies only to actions challenging an ‘agreement signed pursuant to [§ 25-5-292]’(emphasis added), Stricklin’s action disputing the existence of the 2016 agreement [based on lack of mental capacity] falls outside the potential scope of actions covered by the 60-day period.” Ms. *14.

The opinion rejects the defendant’s argument that the general statute §8-1-170, Ala. Code 1975, declaring contracts entered into by incompetent persons void ab initio should yield to the more specific statute § 25-5-292(b) and explains “[t]he legislature could have either (1) expressly abrogated the applicability of § 8-1-170 to agreements formed pursuant to § 25-5-292 or (2) identified mental incapacity as a ground for seeking relief from the effects of a benefit-review agreement within the 60-day period set forth in § 25-5-292(b), but it elected not to. Thus, § 25-5-292 does not, ‘either in express terms or by unmistakable implication,’ reflect that, by enacting § 25-5-292, the legislature intended to overthrow foundational principles of contract formation embraced by both Alabama common law and § 8-1-170. Duncan v. Rudulph, 245 Ala. at 176, 16 So. 2d at 314.” Ms. *21.

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