White v. RGV Pizza Hut ( 2021 )

NOT DESIGNATED FOR PUBLICATION
No. 122,239
IN THE COURT OF APPEALS OF THE STATE OF KANSAS
DANIEL WHITE,
Appellee,
v.
RGV PIZZA HUT and ARGONAUT INSURANCE CO.,
Appellants.
MEMORANDUM OPINION
Appeal from Workers Compensation Board. Opinion filed June 11, 2021. Affirmed and
remanded with directions.
Kip A. Kubin, of Martin Pringle Attorneys at Law, of Overland Park, for appellants.
Brian D. Pistotnik, of Pistotnik Law Offices, L.L.C., of Wichita, for appellee.
Before BRUNS, P.J., GREEN and ATCHESON, JJ.
PER CURIAM: RGV Pizza Hut contends that as a Texas corporation it cannot be
liable under the Kansas Workers Compensation Act merely because it contracted with
Shomberg, Inc., a Kansas corporation, to paint restaurants in its home state. Daniel
White, an employee of Shomberg, fell and was seriously injured working at one of
RGV's restaurants. But Shomberg had neither workers compensation insurance nor the
financial resources or a legal obligation to pay benefits that might be due White.
Although RGV has no ongoing ties to Kansas, the Workers Compensation Appeals Board
ruled that the company can be legally liable for those benefits as a statutory employer.
RGV has appealed that ruling.
1
The Kansas Workers Compensation Act covers employees of Kansas corporations
who are injured while working outside the state. K.S.A. 44-506. So Shomberg could be
held to account for White's covered injuries. Likewise, under the Kanas Workers
Compensation Act, a corporation that subcontracts out work that is an integral or inherent
part of its business may be liable for benefits due employees of the subcontractor. K.S.A.
44-503(a). On appeal, RGV has failed to show that, in tandem, those provisions do not
impose workers compensation liability on it. Moreover, by contracting with a Kansas
business for onsite labor, RGV submitted to personal jurisdiction in Kansas for workers
compensation proceedings, consistent with the Due Process Clause of the Fourteenth
Amendment to the United States Constitution.
The Board also found that White properly availed himself of the protections in
K.S.A. 2020 Supp. 44-523(f)(2) to avert having his claim for benefits dismissed for lack
of prosecution.
We find no error in the Board's resolution of those points. We, therefore, affirm
the Board's decision and remand this case for further proceedings consistent with this
opinion.
FACTUAL AND PROCEDURAL BACKGROUND
For purposes of the issues on appeal, the underlying facts can be stated succinctly.
RGV owns and operates 45 Pizza Hut restaurants in Texas. Under the franchise
agreement with Pizza Hut, RGV must run the restaurants in conformity with detailed
rules governing product preparation, physical layout and appearance, and other matters.
Pertinent here, the agreement requires RGV to keep the roofs of the restaurants in good
repair and specifies the color the roofs must be painted. Pizza Hut may terminate the
franchise agreement if RGV violates its terms.
2
RGV has no restaurants in Kansas and does not otherwise extensively or regularly
conduct business in this state. Over the years, RGV has contracted with Shomberg from
time to time to clean, repair, and paint the roofs on its Pizza Hut restaurants. This is
skilled work done with specialized equipment that requires some training and experience
to operate. Likewise, the work is done on pitched roofs well above ground level, so there
is a predictable, if statistically small, risk of injury for a literal misstep. RGV has never
had its own employees do any work on the roofs. Nor does the company own equipment
used to clean or paint the roofs.
In April 2016, Chris Wicker, the longtime general manager of RGV and a
principal in the company, contacted Christian Shomberg, the owner of Shomberg, to
arrange for the maintenance and painting of the roofs of about 10 of the Pizza Hut
restaurants. Christian Shomberg had begun to wind down that business in favor of other
commercial enterprises. Nonetheless, he agreed to have Shomberg do the roofing work
for RGV. The communications between Wicker and Christian Shomberg consisted
largely of e-mails; the two companies never signed a written contract for the 2016 work.
Christian Shomberg placed an advertisement for workers skilled in commercial
roof maintenance and painting. White responded, and he was hired. Christian Shomberg
and White apparently did a little work before heading to Texas—mostly so Christian
Shomberg could assess White's skills. For this appeal, we consider White to be an
employee of Shomberg under the Workers Compensation Act. That employment
relationship was not in dispute before the Board.
Christian Shomberg, White, and a third person went to Texas to do the work for
RGV. In November 2016, White fell from the roof of one of the restaurants and seriously
injured his leg. The injury required surgery. White later testified that he walked with a
limp and began experiencing back and hip pain. Again, for purposes of this appeal, there
is no dispute White's injury occurred in the scope and course of his employment with
3
Shomberg and is covered under the Workers Compensation Act. Everyone also agrees
Shomberg is not available as a source of workers compensation benefits, and the
company has been dismissed from this action. The principal issues before us are whether
RGV may be substituted for Shomberg as a statutory employer under K.S.A. 44-503 and
whether that substitution would offend the Due Process Clause by imposing personal
jurisdiction over RGV despite its limited contacts with Kansas as the forum state. Given
the procedural progression of the case, neither the administrative law judge nor the Board
has considered what benefits, if any, White may be entitled to receive.
LEGAL ANALYSIS
RGV has appealed adverse rulings of the Board, so this appeal comes to us
through the Kansas Judicial Review Act, K.S.A. 77-601 et seq. K.S.A. 2020 Supp. 44-
556(a). The scope of our review and the kinds of errors we may correct are set out in
K.S.A. 77-621. RGV bears the burden of establishing reversible error. K.S.A. 77-
621(a)(1). We do not see that the primary issues turn on material factual disputes; we,
therefore, exercise review without deference to the Board's resolution of what are
functionally questions of law. See Mera-Hernandez v. U.S.D. 233, 305 Kan. 1182, 1185,
390 P.3d 875 (2017).
RGV's Statutory Liability
Shomberg and White had an employment relationship that triggered coverage
under the Workers Compensation Act. As provided in K.S.A. 44-506, that coverage
extended to the on-the-job injury White suffered in Texas.
The Workers Compensation Act also provides that commercial entities contracting
out work may in some circumstances become liable for benefits due the subcontractor's
employees for on-the-job injuries sustained while performing the subcontract. K.S.A. 44-
4
503(a). The principal contracting out the work is then considered a "statutory employer"
under the Workers Compensation Act. See Bright v. Cargill, Inc., 251 Kan. 387, 390, 837
P.2d 348 (1992). The Board found RGV to be a statutory employer of White.
Under K.S.A. 44-503(a), a principal becomes a statutory employer if it
subcontracts work that is "part of [its] trade or business" or that it "has contracted to
perform." The Board found that RGV's business included maintaining and painting the
roofs of the Pizza Hut restaurants, thus comporting with the first test for a statutory
employer. One Board member concurred, finding that RGV had contracted with Pizza
Hut to maintain and paint the restaurant roofs and, in turn, subcontracted that work to
Shomberg, satisfying the second test in K.S.A. 44-503(a). We discount the concurrence.
The franchise agreement obligates RGV to keep up the appearance of its restaurants but
does not specify a means for accomplishing that obligation. In other words, RGV did not
contract with Pizza Hut to perform the roof maintenance and painting with its own
employees. So RGV wasn't contracting out specific work duties it had agreed to perform
when it hired Shomberg.
The Kansas Supreme Court has developed two independent criteria for
determining when a principal becomes a statutory employer under the first test set out in
K.S.A. 44-503(a): (1) the subcontracted work is "inherent in and an integral part of [its]
trade or business"; or (2) the subcontracted work "ordinarily [would] have been done by
[its] employees." Hanna v. CRA, Inc., 196 Kan. 156, Syl. ¶ 1, 409 P.2d 786 (1966); see
Bright, 251 Kan. 387, Syl. ¶ 3 (endorsing Hanna criteria). Either is sufficient to impose
statutory employer status under the Workers Compensation Act. In Bright, the court
refined the first criterion to focus the assessment of inherency and integrality on whether
similar business entities perform the work with their own employees. 251 Kan. at 399.
Thus, the first criterion looks at whether businesses in a particular industry or commercial
field typically perform the work with their own employees. If so, a business
subcontracting the work will be considered a statutory employer of the subcontractor's
5
workers. The second criterion looks at what the responding employer itself typically
does. If it usually performs the work but subcontracted on a specific occasion, it becomes
the statutory employer of the subcontractor's workers. Here, everyone agrees the second
criterion does not apply to RGV, since it does not do roof maintenance and painting with
its own employees and never has.
The operative language in K.S.A. 44-503(a) has remained intact through multiple
revisions of the Workers Compensation Act. The standards for a statutory employer
continue to be those set out in Hanna as modified in Bright. See Ramirez v. Garay's
Roofing, No. 119,948, 2019 WL 3367831, at *3-4 (Kan. App. 2019) (unpublished
opinion).
On appeal, RGV argues the Board erred in holding it to be White's statutory
employer because maintaining and painting the roofs of the Pizza Hut restaurants is
neither inherent in nor integral to its business. RGV submits its business is making and
selling pizzas—something it can do with or without a Pizza Hut franchise. So if RGV
declined to keep up the roofs or painted them an unapproved color, it might lose its
franchise, but it could still sell pizzas. RGV, therefore, says what it does with the roofs
cannot be so central to its business as to render it a statutory employer of White.
As RGV has framed and argued the point, we disagree. The premise of the
argument seems to be amiss. RGV is not simply in the business of selling pizzas; it is in
the business of selling Pizza Hut pizzas. As a franchisee, RGV benefits from Pizza Hut's
national marketing and its strategic development of innovative twists on pizza, calzones,
and other menu items. More broadly, however, Pizza Hut intentionally cultivates a
known and largely uniform customer experience across its flagged restaurants from
exterior appearance to available menu items to the actual preparation and presentation of
the food. The deliberate and exhaustive homogeneity invites people familiar with one
Pizza Hut to patronize others precisely because of the comfortable predictability. The
6
exacting requirements in the franchise agreement are an integral part of the commercial
enterprise that is Pizza Hut.
RGV's argument, therefore, fails to undercut the Board's determination of statutory
employer status under K.S.A. 44-503(a). In the absence of any other developed
arguments from RGV challenging the Board's conclusion, we do not explore the point
further. See State v. Bradford, 311 Kan. 747, 752-53, 466 P.3d 930 (2020).
Personal Jurisdiction Over RGV
RGV argues that it lacks sufficient minimum contacts with Kansas to be held to
answer in adjudicatory proceedings here. Under the Due Process Clause, a party must
have some demonstrable connection to the forum state establishing personal jurisdiction
and, thus, permitting the proceedings to go forward. Otherwise, the proceedings against
that party offend basic notions of "fair play" and should not be allowed. BNSF Railway
Co. v. Tyrrell, 581 U.S. ___, 137 S. Ct. 1549, 1558, 198 L. Ed. 2d 36 (2017);
International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95(1945). Constitutionally sufficient personal jurisdiction may be based on a party's general
contacts with the forum state or contacts arising specifically from the matter being
adjudicated. Bristol-Myers Squibb Co. v. Superior Court of California, 582 U.S. ___, 137
S. Ct. 1773, 1779-80, 198 L. Ed. 2d 395 (2017). General jurisdiction derives from a
corporation's "continuous and systematic" contacts with or presence in the forum state
and must be extensive. BNSF Railway, 137 S. Ct. at 1558. RGV does not have those
kinds of ties to Kansas.
Here, there is no dispute that RGV sought out and entered into a contract with
Shomberg knowing the company was based in Kansas. The contract was never reduced to
writing, and all of its terms may have been difficult to tease out of the communications
between Wicker and Christian Shomberg. But there plainly was an agreement requiring
7
Shomberg to perform labor-intensive work on a significant number of RGV's restaurants.
Despite the nature of the contracted services, RGV did not require Shomberg to establish
it had workers compensation insurance. White's workers compensation claim equally
plainly related to the contractual relationship between RGV and Shomberg. That is
enough to satisfy the requirements of the Due Process Clause for personal jurisdiction
over RGV in Kansas to adjudicate White's workers compensation claim.
But simply because Party A, a Kansas resident, contracts with Party B, a Texas
resident, Kansas does not automatically acquire personal jurisdiction over Party B to
litigate a breach of contract claim against it. See Walden v. Fiore, 571 U.S. 277, 285-86,
134 S. Ct. 1115, 188 L. Ed. 2d 12 (2014). For example, a tourist from Kansas who
ordered a pizza at one of RGV's restaurants presumably could not later sue the company
in the Kansas courts for breach of contract or in tort because the food had been
adulterated. See Dirks v. Carnival Cruise Lines, 642 F. Supp. 971, 973-74 (D. Kan.
1986); Dunham v. Hunt Midwest Entertainment, Inc., 2 Neb. App. 969, 987, 520 N.W.2d
216 (1994) (Missouri amusement park's general advertising in Nebraska insufficient to
create personal jurisdiction there for injuries Nebraska residents sustained at the
amusement park). RGV's interaction with the tourist would not entail any contact with
Kansas itself, as the forum state. See Bristol-Myers, 137 S. Ct. at 1782-83.
Other sorts of contracts between our Party A and Party B may create sufficient
minimum contacts with Kansas based on their terms and the circumstances of their
formation even if Party B remains in Texas and never physically enters Kansas. Walden,
571 U.S. at 283-85. The due process analysis looks at the circumstances connecting Party
B, as the defendant or respondent, to both the forum and the litigation rather than merely
to Party A. Contact directed into the forum, as by "mail, or some other means," is
relevant, so physical presence in the forum state is not a necessary condition for personal
jurisdiction. 571 U.S. at 285. And the circumstances creating the minimum contacts
necessary for personal jurisdiction in the forum state often will be "intertwined" with the
8
parties' interactions. 571 U.S. at 286. Ultimately, the existence of personal jurisdiction is
heavily dependent upon the particular facts. See Burger King Corp. v. Rudzewicz, 471
U.S. 462, 485-86, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985) (recognizing inquiry heavily
fact based and "reject[ing] any talismanic jurisdictional formulas"); see also CFA Institute
v. Institute of Chartered Financial Analysts of India, 551 F.3d 285, 294 (4th Cir. 2009)
(recognizing assessment of personal jurisdiction to be "necessarily fact-based"). The
United States Supreme Court recently reaffirmed the basic principles of general and
specific personal jurisdiction. See Ford Motor Company v. Montana Eighth Judicial
District Court, 592 U.S. ___, 141 S. Ct. 1017, 1024-25, 209 L. Ed. 2d 225 (2021).
RGV relies on Walden and International Shoe, the pioneering opinion setting out
the modern doctrine of personal jurisdiction, to support its position. We are unpersuaded.
The facts of Walden are inapposite—the Court found no personal jurisdiction in Nevada
over a government agent for an intentional constitutional tort he allegedly committed in
Georgia against two Nevada residents as they traveled through the Atlanta airport. The
principles governing personal jurisdiction outlined in Walden do not support the
argument this workers compensation action offends due process concepts of minimum
contacts and fair play. 571 U.S. at 284-85 (Personal jurisdiction may exist when a party
"creates" substantive contacts with the forum state itself extending beyond interactions
with residents of the forum state that may occur elsewhere.). Entering into a contract that
implicates contacts with the forum state may suffice. 571 U.S. at 285.
The Court in International Shoe offered this much cited statement of the law:
"[D]ue process requires only that in order to subject a defendant to a judgment in
personam, if he be not present within the territory of the forum, he have certain minimum
contacts with it such that the maintenance of the suit does not offend 'traditional notions
of fair play and substantial justice.'" 326 U.S. at 316 (quoting Milliken v. Meyer, 311 U.S.
457, 463, 61 S. Ct. 339, 85 L. Ed. 278 [1940]. The Court rejected the notion of a
"mechanical or quantitative" test for personal jurisdiction and opted for a more
9
individualized assessment "depend[ant] . . . upon the quality and nature of the activity in
relation to the fair and orderly administration of the laws which it was the purpose of the
due process clause to insure." 326 U.S. at 319; see also Burger King, 471 U.S. at 485-86.
But a state cannot exercise personal jurisdiction over a corporation having "no contacts,
ties, or relations" to it. International Shoe, 326 U.S. at 319.
Expounding on those principles 40 years later, the Court recognized personal
jurisdiction consistent with the Due Process Clause may be established when a party has
"'purposefully directed'" its activities at the forum state and the resulting litigation arises
from legal injuries associated with those activities. Burger King, 471 U.S. at 472-73.
Accordingly, "the Due Process Clause may not readily be wielded as a territorial shield to
avoid interstate obligations that have been voluntarily assumed." 471 U.S. at 474. If a
party has purposefully established some minimum contact with the forum state, the courts
may consider an array of factors to measure the due process fairness of the adjudication,
including the litigation burdens imposed on the defending party and shared state interests
in fostering "'fundamental substantive social policies.'" 471 U.S. at 477 (quoting World-
Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 100 S. Ct. 559, 62 L. Ed. 2d 490[1980]). Those remain guideposts for courts considering challenges to personal
jurisdictions. See Ford Motor Company, 141 S. Ct. at 1030 (state's interest in enforcing
its "own safety regulations" reflects form of "'interstate federalism'" favoring personal
jurisdiction); Curry v. Revolution Laboratories, LLC, 949 F.3d 385, 402 (7th Cir. 2020);
Packaging Systems and Enterprises, Inc. v. Operational Solutions, Inc., No. 117,930,
2018 WL 2748501, at *5 (Kan. App. 2018) (unpublished opinion).
Here, as we have indicated, RGV purposefully sought out Shomberg, as it had in
the past, to perform the roof maintenance and painting. And, in doing so, RGV knew full
well it was contracting with a Kansas corporation. There was nothing random or
attenuated about that connection. It was not the result of RGV's general advertising or its
solicitation of any interest bidders for the work. Likewise, RGV is a sophisticated
10
commercial entity; it was not an unsuspecting consumer snagged through some fine print
in a take-it-or-leave-it agreement. Those are considerations cutting against a violation of
due process fair play. See Burger King, 471 U.S. at 485-86.
In addition, the contract between RGV and Shomberg was considerably more than
an incidental transaction. Shomberg agreed to perform substantial work on about 10
restaurants. The work required skilled labor and entailed a foreseeable, if limited, risk of
physical injury. Had RGV not contracted out the work, it presumably would have had to
hire additional employees for that purpose. Workers compensation statutes are
ubiquitous, so RGV knew or reasonably should have known Shomberg's employees were
entitled to such benefits for on-the-job injuries—just as its own employees would have
been. Although the statutory protections vary from state to state, RGV apparently chose
not to require Shomberg to insure for payment of workers compensation claims as a
shield against its own potential liability.
As an action for workers compensation benefits, this proceeding substantively
differs from a typical civil action in ways that bolster Kansas' interest as the forum state
in exercising personal jurisdiction over RGV consistent with the considerations outlined
in Burger King. Civil suits grounded in negligence or breach of contract redress private
wrongs between the parties. Historically, workers compensation statutes have advanced a
significant social welfare policy promoting the public good. Those statutes extend
payments for medical care and as income replacement to persons injured on the job in a
streamlined administrative process without regard to fault. The process displaced civil
tort actions that depended on proving an employer's negligence and historically imposed
harsh bars to recovery, such as contributory negligence. But under workers compensation
schemes, employers no longer faced juries or potentially large verdicts for noneconomic
damages in civil suits that were often both risky and expensive to defend. On balance,
workers compensation was viewed as progressive legislation aimed at caring for injured
workers and keeping them and their families from destitution or the public dole. See
11
Hawkins v. Southwest Kansas Co-op Service, 58 Kan. App. 2d 38, 44-45, 464 P.3d 14(2020) (discussing history and purpose of workers compensation measures), aff'd in part,
rev'd in part 313 Kan. __, 484 P.3d 236 (2021). Accordingly, the nature of these
proceedings—advancing the objectives of the Kansas Workers Compensation Act, as a
fundamental social policy—favor finding personal jurisdiction over RGV. Moreover,
RGV has pointed to no actual prejudice or procedural disadvantage to it in having to
litigate this administrative action in Kansas apart from having to answer at all.[1]
[1]Of late, some workers compensation claimants contend the Kansas process has
become so skewed in favor of employers that it no longer adequately serves the socially
progressive purposes that prompted its enactment and is, therefore, unconstitutional. The
Kansas Supreme Court recently acknowledged but averted the constitutional issue by
construing a portion of the Workers Compensation Act to vitiate a cornerstone attack on
the current scheme. See Johnson v. U.S. Food Service, 312 Kan. ___, 478 P.3d 776, 778-
80 (2021). RGV and White have not joined that debate here. Especially given the ruling
in Johnson, the competing views of the present worth of the Workers Compensation Act
as a matter of public policy do not bear on our assessment of personal jurisdiction over
RGV.
We also discount arguments RGV makes based on Abbey v. Cleveland Inspection
Services, Inc., 30 Kan. App. 2d 114, 41 P.3d 297 (2002), and on K.S.A. 2020 Supp. 60-
308(b), the Kansas long-arm statute. In Abbey, an Oklahoma company hired a Kansas
resident to do work on a project in New Mexico, where the individual suffered an on-the-
job injury. The Oklahoma company was insured for workers compensation claims
through the State Insurance Fund of Oklahoma. The only issue before the court in Abbey
was personal jurisdiction over the Insurance Fund for purposes of a Kansas workers
compensation claim. The court held the Insurance Fund lacked minimum contacts with
Kansas and could not have been subject to liability under K.S.A. 44-559, a specific
statute governing insurance carriers. 30 Kan. App. 2d at 117-19. But RGV is neither
factually nor legally situated similarly to the Insurance Fund in Abbey. Unlike the
Insurance Fund, RGV contracted directly with Shomberg, a Kansas corporation, to do
extensive work on its restaurants. And RGV's liability was based on its status as a
12
statutory employer and not as an insurer of a covered employer. As such, RGV was
legally more analogous to the Oklahoma company that hired the Kansas worker rather
than to the Insurance Fund.
RGV's reliance on the long-arm statute is similarly unavailing. Under K.S.A. 2020
Supp. 60-308(b), persons or entities engaging in specified acts in Kansas thereby submit
to the jurisdiction of this state's courts for civil proceedings arising from those acts. The
long-arm statute, however, does not apply to workers compensation claims, since they are
distinct administrative actions brought under the Workers Compensation Act rather than
civil lawsuits. Nonetheless, RGV contends it failed to satisfy K.S.A. 2020 Supp. 60-
308(b)(1)(E) by entering into a contract with a Kansas resident to be performed in some
part in this state. Even assuming the premise to be correct, the long-arm statute also
applies to a party "having contact with [Kansas] that would support jurisdiction
consistent with the constitutions of the United States and this state." K.S.A. 2020 Supp.
60-308(b)(1)(L). That subsection renders the long-arm statute coextensive with personal
jurisdiction permissible under the Due Process Clause. We have already examined RGV's
argument for lack of personal jurisdiction on due process grounds and found it legally
wanting. So K.S.A. 2020 Supp. 60-308 would afford RGV no additional shield to these
proceedings if it were applicable.
Although RGV's contacts with Kansas have been limited, they include the direct
solicitation of Shomberg to perform work with its employees on at least 10 of the
company's restaurants with the known and ever present risk one or more of those workers
might be injured on the job. RGV, as a sophisticated business enterprise, similarly knew
or should have known an injury likely would trigger a workers compensation claim to be
adjudicated administratively in Kansas. Those circumstances are enough to establish the
minimum contacts necessary to satisfy the due process requirements for personal
jurisdiction over RGV for this workers compensation proceeding. Nothing about that
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exercise of personal jurisdiction has impeded RGV's ability to respond to the claim or
otherwise suggests a lack of fair play in requiring a response.
White's Timely Prosecution of Benefits Claim
Finally, RGV contends White did not timely pursue his claim for benefits and the
administrative law judge erred in granting him an extension under K.S.A. 2020 Supp. 44-
523(f). If a claimant fails to proceed to a regular hearing within one year after a
preliminary hearing denying the claim, an administrative law judge may entertain a
motion from the respondent employer to dismiss the proceeding for a failure to prosecute.
A dismissal is with prejudice. A claimant may avert dismissal if he or she "can prove a
good faith reason for the delay." K.S.A. 2020 Supp. 44-523(f)(2). The parties have not
directed us to any appellate cases construing K.S.A. 2020 Supp. 44-523(f)(2), and we
have found none.
White's lawyer represented to the administrative law judge that the challenged
delay arose primarily from difficulties in obtaining discovery from Shomberg and RGV
bearing on the status of those businesses as covered employers under the Workers
Compensation Act. The administrative law judge, of course, had full access to the claim
file in assessing the obstacles to discovery. While disputes over a respondent's status as a
covered employer come up from time to time, they are relatively rare. But the employer's
status entails a gatekeeping issue: If an employer is not covered, it cannot be held to
answer. Here, at the preliminary hearing, the administrative law judge found RGV and
Shomberg were not covered employers, a decision a single Board member upheld on
review. The administrative law judge found White's continuing efforts to discover
evidence bearing on the status of Shomberg and RGV as covered employers presented a
good-faith reason to excuse the delay in moving the case forward to final determination,
thereby precluding dismissal under K.S.A. 2020 Supp. 44-523(f)(2) for a failure to
prosecute. In short, White needed the evidence to combat the adverse preliminary hearing
14
ruling. The Board agreed, finding White "was litigating the case" for most of the
applicable one-year period.
At the outset, we face a question over our standard of review on this issue. If there
were disputed issues of fact the administrative law judge and the Board resolved, we
presumably would apply a mixed standard. Under K.S.A. 77-621(d), we review an
administrative agency's factual findings for substantial support in the evidentiary record
as a whole, giving due deference to its credibility determinations and without reweighing
conflicting evidence. See Ward v. Allen County Hosp., 50 Kan. App. 2d 280, 284-85, 324
P.3d 1122 (2014). As we have indicated, we independently review the agency's legal
conclusions in light of the established facts. Mera-Hernandez, 305 Kan. at 1185. We may
reverse an agency ruling if it reflects an error of law; lacks factual support; or "is
otherwise unreasonable, arbitrary[,] or capricious"; among other reasons. K.S.A. 77-
621(c). We decline to further label or characterize our standard of review.
As with the other issues RGV has raised on appeal, we perceive no material
factual disputes on the propriety of the extension under K.S.A. 2020 Supp. 44-523(f)(2).
We, therefore, approach this as a legal question without deference to the administrative
law judge or the Board. Mera-Hernandez, 305 Kan. at 1185. RGV would be entitled to
no more favorable a standard of review, so an error on our part inures to its benefit.[2]
[2]There is a substantive question about what amounts to a "good faith reason"
under K.S.A. 2020 Supp. 44-523(f)(2). The parties have not delved into the meaning of
the phrase. Conceptually, "good faith" may be subjective, objective, or both. Subjective
good faith refers to the actor's desire or intent to act honestly or fairly. See United States
v. Wallen, 874 F.3d 620, 629-30, 632 (9th Cir. 2017) (recognizing subjective good faith
may be defense to criminal charge under Endangered Species Act). Conversely, objective
good faith turns on the outward reasonableness or fairness of the actor's conduct without
regard to the intent animating that conduct. Hammer v. Thompson, 35 Kan. App. 2d 165,
175, 129 P.3d 609 (2006) (merchant's obligation of good faith under Uniform
Commercial Code requires both honesty in fact and adherence to commercially
reasonable standards); Wallen, 874 F.3d at 631 (good-faith exception to exclusionary rule
15
based on objective reasonableness). We do not need to decide the issue because the
administrative findings are consistent with both subjective and objective good faith.
On appeal, RGV makes two arguments challenging the extension granted White
under K.S.A. 2020 Supp. 44-523(f)(2). First, RGV seems to say the administrative law
judge and the Board erred in finding good cause, but it never precisely explains the error.
We are unmoved. The contention consists of nothing more substantive than a conclusory
retort: "No, that's not a good faith reason." White's articulated reasons were facially
sufficient, so we will not disturb those findings without something more.
RGV also latches on to the word "prove" in K.S.A. 2020 Supp. 44-523(f)(2) and
submits White failed to sufficiently establish his reasons for the delay because he relied
on the representations of his lawyer to the administrative law judge and did not offer
testimony or documentary evidence at the hearing. The argument is untenable. RGV has
only now on appeal objected to the quality of what White offered in support of the
requested extension. RGV lodged no such contemporaneous objection with the
administrative law judge. Nor did it argue then that the representations were substantially
incorrect or legally insufficient. Through its inaction at the hearing level, RGV waived or
forfeited the argument. To credit the argument now we would endorse an unacceptable
form of sandbagging. See Finnegan v. Commissioner of Internal Revenue, 926 F.3d
1261, 1272-73 (11th Cir. 2019) (characterizing raising new argument on appeal as
sandbagging and declining to consider argument); Raich v. Gonzales, 500 F.3d 850, 868
& n.18 (9th Cir. 2007).
Moreover, White's representations to the administrative law judge about the
discovery disputes and resulting delays were corroborated through the motions and other
papers the parties submitted in litigating those disputes. The administrative law judge and
the Board are not bound by "technical rules of procedure" or strict adherence to the rules
of evidence with aim of affording the parties a reasonable opportunity to be heard and a
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fundamentally fair hearing. K.S.A. 2020 Supp. 44-523(a); Chriestenson v. Russell Stover
Candies, 46 Kan. App. 2d 453, 460, 263 P.3d 821 (2011) (rules of evidence not strictly
applied in workers compensation proceedings). Under the circumstances, the
administrative law judge properly relied on the representations of White's lawyer,
especially in the absence of an objection from RGV, and the materials filed in the case.
See In re K.H., 56 Kan. App. 2d 1135, 1141, 444 P.3d 354 (2019) (court may take
judicial notice of its own records in given case).
RGV has failed to present grounds warranting reversal of the administrative law
judge and the Board on the extension granted White under K.S.A. 2020 Supp. 44-
523(f)(2).
Conclusion
RGV has failed to show the Board erred in finding it to be a statutory employer of
White. Requiring RGV to respond to White's claim for benefits does not offend
fundamental due process considerations for personal jurisdiction, particularly given the
purpose of the Workers Compensation Act and RGV's direct solicitation of a Kansas
company to do labor-intensive work in Texas. Finally, White satisfied the good-faith
requirement justifying the delay in these proceedings consistent with K.S.A. 2020 Supp.
44-523(f)(2).
We, therefore, affirm the Board and remand for further proceedings consistent
with this opinion.
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