O'Neal v. Century Insurance Company

Filing 57

ORDER Denying 38 Defendants' Motion to Dismiss, Or In The Alternative, Motion To Stay Proceedings. Signed by JUDGE ALAN C KAY on 8/11/14. (gab, )CERTIFICATE OF SERVICEParticipants registered to receive electro nic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
DUTCH O’NEAL,
Plaintiff,
v.
CENTURY INSURANCE COMPANY,
Defendant.

) Civ. No. 13-00058 ACK-RLP
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ORDER DENYING DEFENDANT’S MOTION TO DISMISS, OR IN THE
ALTERNATIVE, MOTION TO STAY PROCEEDINGS
For the following reasons, the Court DENIES Century’s
Motion to Dismiss, or in the Alternative, Motion to Stay
Proceedings.
FACTUAL BACKGROUND1/
This case involves Plaintiff Dutch O’Neal’s ongoing
workers’ compensation claim, which arises out of an accident that
occurred on December 10, 2003, when he slipped and fell while
working as an executive chef at the Dai-Ichi Resort in Saipan,
Commonwealth of the Northern Mariana Islands (“CNMI”). Plaintiff
alleges that Defendant Century Insurance Company denied or
delayed workers’ compensation benefits that he was owed.
I. The Initial Injury and Subsequent Medical Treatment
1/

The facts as recited in this order are for the purpose of
disposing of the current motion and are not to be construed as
findings of fact that the parties may rely on in future
proceedings.

Plaintiff is a Hawaii resident. (Compl. ¶ 1.) At the
time of his subject injury, he worked as an Executive Chef for
the Dai-ichi Hotel in Saipan, CNMI.2/ The Hotel had a workers’
compensation insurance policy issued by Defendant Century
Insurance Company (“Century”). (Id. ¶ 6.)
On December 10, 2003, Mr. O’Neal injured his lower back
and one of his knees when he slipped and fell while working at
the Hotel. (Id. ¶ 5.) He was diagnosed with a torn ligament in
his knee and a lower back injury. (Id.) In early February of
2004, with his symptoms worsening, Plaintiff was transported
“with the consent and assistance of Century” to Hawaii for
diagnostic testing and treatment. (Id. ¶ 6.) Thereafter, all of
Plaintiff’s treatment occurred in Hawaii. After a lumbar spine
MRI, Plaintiff was diagnosed with a herniated disk fragment
requiring surgery. (Id. ¶ 7.) Plaintiff asserts in his Complaint
that, due to delay in approval by Century, he did not actually
undergo surgery for his spinal injury until November 10, 2004.
(Id. ¶ 8.) He also had knee surgery in January of 2005. (Id.)
In August of 2006, Plaintiff’s consulting neurologist,
Dr. Leo Maher, recommended to Century a Treatment Plan (to be
carried out on Oahu) headed by Dr Linda Rowan and Dr. Jeffrey
Wang. (Id. ¶ 9.) In late 2006, Plaintiff’s Century-assigned case

2/

The Dai-ichi Hotel has since changed its name to Fiesta
Resort and Spa. (Comp.¶ 5.)
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manager discontinued her services; it was not until March 19,
2008 that Century assigned Plaintiff a new case manager (Deborah
Smith). (Id. ¶¶ 10-11.) Plaintiff claims that this delay in
assigning a new case manager resulted in delays in implementing
his Treatment Plan, including a delay in approving a change of
physician to Dr. Rowan. In April of 2008, Century approved the
change of physician to Dr. Rowan, and agreed to provide Plaintiff
with housing support so that he could undergo treatment on Oahu
pursuant to the Treatment Plan. (Id. ¶ 12.)
On December 23, 2009, Dr. Rowan submitted to Century a
proposal for the surgical implantation of a pain control device
in Plaintiff’s spinal column, a Spinal Cord Simulator (“SCS”).
The treatment, involving a trial implant and, if successful, a
permanent implant, was approved, and the trial implant surgical
procedure was performed on January 6, 2010 by Dr. Wang. (Id.
¶¶ 13-14.) The trial implant reduced Plaintiff’s pain symptoms
and was deemed successful by Dr. Wang. (Id. ¶ 14.) Nevertheless,
Century “verbally rescinded” approval of the permanent SCS
procedure and “abruptly discontinued” the services of Deborah
Smith, Plaintiff’s case manager, on January 28, 2010. (Id. ¶ 15.)
A new case manager, who Plaintiff claims was less
qualified than Deborah Smith, was assigned to Plaintiff two
months later, on March 16, 2010. (Id. ¶ 16.) In the interim,
Plaintiff’s psychological and physical health continued to

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deteriorate. (Id. ¶ 17.) Finally, after numerous requests for
Century to reconsider approving the SCS procedure, Century reapproved the procedure on September 23, 2010. (Id. ¶ 18.) In
light of Plaintiff’s deteriorating condition, it was not until
April 28, 2011, that he was cleared for the second trial SCS
implantation procedure (a second trial was now required to ensure
that the permanent implant would be successful). (Id. ¶ 20.)
On May 17, 2011, however, Century filed an
administrative claim with the Workers’ Compensation Commission of
CNMI and suspended all payments for medical treatment or housing
support. (Id. ¶ 21.) Despite Century’s discontinuation of all
payments and notice of suspension of benefits, on June 1, 2011,
Dr. Wang proceeded with the second trial implant. (Id. ¶ 22.)
Because of the delay in approval from the date of the first trial
implant (in January of 2010) to the second trial implant (in June
of 2011), however, scar tissue had accumulated in Plaintiff’s
spine, making a complete permanent SCS implant impossible. (Id. ¶
23.) As a result, Plaintiff alleges that further surgical
procedures will be necessary, and his physical and psychological
condition continues to deteriorate. (Id. ¶ 23, 25.)
II.

The Workers’ Compensation Commission Proceeding
Proceedings before the CNMI Workers’ Compensation

Commission (“the WCC”) regarding Plaintiff’s entitlement to
workers’ compensation benefits are ongoing. As discussed above,

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on May 17, 2011, Century filed a “Notice of Suspension of
(Workers’) Compensation Benefits and Request for Hearing” before
the WCC, and stopped paying Plaintiff’s medical expenses and
other related expenditures. (Id. ¶ 21.) In the administrative
proceeding, Century seeks a ruling that Plaintiff has reached
maximum medical improvement or, in the alternative, seeks to have
the WCC Administrator take an active role in determining the
course and nature of Plaintiff’s treatment going forward. (Mot.,
Ex. A at 4.) Century also seeks an investigation into whether any
medical malpractice or fraud may have occurred in connection with
Plaintiff’s treatment, and a determination that Plaintiff’s
disabilities that occurred after his initial injury are not a
result of the original injury. (Id. at 4-5.)
The WCC held a hearing on Century’s administrative
motion on August 25, 2011. (Compl. ¶ 24.) Medical considerations
precluded Plaintiff from traveling to the CNMI for the hearing;
however, he was able to attend the hearing by telephone. (Id. ¶
24.) Plaintiff did obtain a “volunteer attorney” in the CNMI to
represent him at the hearing. (See Mot., Ex. A at 3, 18 n.20.) At
the time of the hearing, the hearing officer verbally ordered
Century “to maintain medical treatments and housing subsidy.”
(Compl. ¶ 27.) Century notes that its total payments on
Plaintiff’s behalf exceed one million dollars. (Mot. at 2.)
On December 30, 2013, the WCC issued an Administrative

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Order concluding that an Independent Medical Examination is
necessary for the WCC to adjudicate Plaintiff’s case. (Mot., Ex.
A at 11-12.) The WCC ordered Century to maintain Plaintiff’s
current level of compensation benefits and treatment until the
administrative case is resolved. (Id. at 5, n.8.) The Independent
Medical Examination was scheduled for June 25, 2014. (See Mot.,
Sia Decl. ¶ 5.) On July 11, 2014, Administrative Hearings Officer
Bruce L. Mailman filed in the WCC his “Notice of Withdrawal of
Administrative Hearings Officer.” (Doc. No. 55.) Plaintiff’s
workers’ compensation claim remains pending before the WCC.
PROCEDURAL BACKGROUND
Plaintiff filed his Complaint in this district court on
February 4, 2013. (Doc. No. 1.) In his Complaint, Plaintiff
alleges the following claims against Century: (1) bad faith, (2)
negligent and/or intentional infliction of emotional distress,
(3) violation of Hawaii’s Unfair Competition or Practices Act,
and (4) defamation and slander. (Compl. at 2, 9-11.)
On August 14, 2013, the Court denied Century’s Motion
to Dismiss for Lack of Personal Jurisdiction or Improper Venue,
or in the Alternative, to Transfer Venue, concluding that
Plaintiff has demonstrated that this court has jurisdiction over
the instant matter, and that venue is likewise proper. (Doc. No.
18.)
On May 20, 2014, Century filed the instant Motion to

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Dismiss or in the Alternative Stay Proceedings. (Doc. No. 38
(“Motion”).) Plaintiff filed his memorandum in opposition on June
20, 2014.3/ (Doc. No. 46.) Century filed its reply on June 23,
2014. (Doc. No. 47.) A hearing on the motion was held on June 30,
2014. (Doc. No. 49.)
At Century’s request (made during the hearing), the
Court issued a minute order directing Century to file a petition
with Administrative Hearing Officer Bruce L. Mailman seeking
clarification regarding whether he intended to make further
findings with respect to certain predicate facts before this
Court, including with respect to the issues of reasonableness,
bad faith, and failure to mitigate damages. (Doc. No. 50.)
Shortly thereafter, Plaintiff’s counsel informed the Court that
Hearing Officer Mailman had withdrawn from the WCC case. (Doc.
No. 55.) Century’s counsel responded to this information via a
letter to the Court stating that Century maintains that dismissal
or a stay of the instant case is appropriate in light of the
ongoing WCC action. (Doc. No. 56.)
DISCUSSION
Relying on the primary jurisdiction doctrine, Century

3/

On May 30, 2014, in response to Century’s request, the
Court advanced the hearing on the Motion to June 30, 2014. (Doc.
No. 41.) On June 10, 2014, in response to correspondence from
Plaintiff’s counsel requesting that the hearing be set at a later
date, the Court granted Plaintiff an additional ten days in which
to file his memorandum in opposition to the Motion. (Doc. No.
43.)
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moves for dismissal or a stay of all of Plaintiff’s claims until
there is a final adjudication by the WCC. Under the primary
jurisdiction doctrine, courts may stay proceedings when issues
involved in the proceedings are under consideration by an
administrative agency with extensive regulatory powers over the
matter and the parties involved. See Indus. Commc’n Sys. v. Pac.
Tel. & Tel. Co., 505 F.2d 152, 156 (9th Cir. 1974). The doctrine
applies to a claim that is originally cognizable in the courts
but which requires the resolution of issues that are “within the
special competence of an administrative agency.” Reiter v.
Cooper, 507 U.S. 258, 268 (1993); Aged Hawaiians v. Hawaiian
Homes Comm’n, 891 P.2d 279, 289 (Haw. 1995). This doctrine allows
the court to “refer” an issue to the administrative agency before
proceeding with the suit. Syntek Semiconductor Co. v. Microchip
Tech., Inc., 307 F.3d 775, 782 n.3 (9th Cir. 2002).
Thus, a court may “stay the proceedings while an
administrative agency decides predicate issues necessary to
adjudicate” the claims before the court. Jou v. Nat’l Interstate
Ins. Co. of Haw., 157 P.3d 561, 567 (Haw. Ct. App. 2007) (citing
Reiter, 507 U.S. at 268).4/ The Hawaii Supreme Court has recently

4/

The Court also has the power to stay proceedings under
the Court’s inherent power to control its own docket See Landis
v. North Am. Co., 299 U.S. 248, 254–55 (1936) (“the power to stay
proceedings is incidental to the power inherent in every court to
control the disposition of the causes on its docket with economy
of time and effort for itself, for counsel, and for litigants.
(continued...)
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stated that “[n]o fixed formula exists for applying the doctrine
of primary jurisdiction. In every case the question is whether
the reasons for the existence of the doctrine are present and
whether the purposes it serves will be aided by its application
in the particular litigation.” United Pub. Workers, AFSCME, Local
646, AFL-CIO v. Abercrombie, 325 P.3d 600, 610 (Haw. Feb. 28,
2014) (quoting United States v. Western Pac. R.R., 352 U.S. 59,
64 (1956) (alteration in original)).
Here, Plaintiff’s claims are not brought under the CNMI
Workers’ Compensation Law. Rather, Plaintiff brings claims
arising under Hawaii law for bad faith, negligent and/or
intentional infliction of emotional distress, violation of
Hawaii’s Unfair Competition or Practices Act, and defamation and
slander, all premised upon the allegations that Century has
wrongfully delayed and denied Plaintiff’s workers’ compensation
and thwarted his efforts to get effective treatment for his
injuries. (See Compl. at 2, 9-11.) These causes of action are
independent of the CNMI workers’ compensation scheme. See Hough
v. Pacific Ins. Co., Ltd., 927 P.2d 858, 869-70 (Haw. 1996)
(acknowledging that bad faith is a tort cause of action

4/

(...continued)
How this can best be done calls for the exercise of judgment,
which must weigh competing interests and maintain an even
balance”); Mediterranean Enter. v. Ssyangyong Corp., 708 F.2d
1458, 1465 (9th Cir. 1983) (the “trial court possesses the
inherent power to control its own docket and calendar”).
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independent from Hawaii’s worker’s compensation scheme). Thus,
while workers’ compensation disputes in the CNMI generally appear
to fall under the CNMI’s comprehensive regulatory authority, see
1 N. Mar. I. Admin. Code §§ 20-100 et seq., Plaintiff’s claims in
the instant suit arise independently under Hawaii law.
Importantly, however, the fact that Plaintiff’s claims
are not brought under the CNMI Workers’ Compensation Act does not
in and of itself foreclose the application of the primary
jurisdiction doctrine. See United Pub. Workers, 325 P.3d at 613
(“The agency and the court need not have concurrent jurisdiction
over the claims [for the primary jurisdiction doctrine to apply],
as long as the agency and the court have concurrent jurisdiction
over issues presented in the claims.”). Thus, Century argues that
the doctrine should apply because Plaintiff’s Complaint raises
predicate factual issues (for example, whether Century has
unreasonably delayed Plaintiff’s treatment, whether Plaintiff has
been malingering, and whether the interventions Plaintiff seeks
are necessary) that the WCC should be permitted to adjudicate in
the first instance.
In his Complaint, Plaintiff alleges numerous bad-faith
actions by Century, including the following: first, when
Plaintiff’s first nurse case manager resigned for personal
reasons, Century did not replace her for more than a year. (Id.
¶ 10-11.) Century later fired Plaintiff’s second case manager and

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replaced her with an apparently uncertified case manager. (Id.
¶ 15-16.) Second, after Plaintiff had already received a
successful trial SCS implant, Century rescinded its prior written
approval for a permanent implant. (Id. ¶ 13- 15.) When Plaintiff
appealed, Century did not reapprove the permanent implant until
approximately nine months after it initially approved the SCS
procedure. (Id. ¶ 18.) After Plaintiff received the second
approval and underwent an evaluation process to ready him for a
second SCS implant, Century filed its Notice of Suspension of
(Workers’) Compensation Benefits. (Id. ¶ 19-21.) When Plaintiff’s
doctor nevertheless proceeded with the SCS procedure, the
permanent SCS implant was only partially successful because of
“scar tissue [that] had accumulated in Plaintiff’s spine during
the period of [Century’s] delay” in re-approving the procedure.
(Id. ¶ 22-23.) Third, despite being ordered by a CNMI workers’
compensation hearing officer to “maintain medical treatments and
housing subsidy,” Century has refused approval of certain
treatments. (Id. ¶ 27-28.) Plaintiff also alleges that Century
has defamed and slandered him by “accus[ing Plaintiff] of
non-compliance with treatment recommendations [and] refusal to
submit to medical procedures, propos[ing] an investigation for
fraud, [and] hir[ing] an investigator to videotape and stalk
[Plaintiff].” (Id. ¶ 38.)
In light of these allegations, Century is correct in

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noting that adjudication of the instant case will involve an
assessment of factual questions regarding the nature and extent
of Plaintiff’s injuries, whether he is entitled to the benefits
he is requesting, and the reasonableness of Century’s delays and
denials of certain treatments. The WCC has, however, already made
a number of findings in this case in its interim December 30,
2013 Order, and the Court cannot conclude at this time that any
future order issued by the WCC will further address any or all of
the predicate factual issues of the instant case.
In its December 30, 2013 Order, the WCC found that
Plaintiff’s injuries are compensable under the CNMI Worker’s
Compensation Act. (Mot., Ex. A (“12/30/13 Order”) at 5-6.) Thus,
it appears the WCC has already passed on one of the important
issues in the case: Plaintiff’s entitlement to workers’
compensation benefits. The 12/30/13 Order also contains a lengthy
“Findings of Fact” section, in which the WCC sets forth the
factual background of the case, including the history and course
of Plaintiff’s treatments. (Id. at 6-11.) The WCC also states at
one point in the order that Century has not acted in bad faith
(noting that both parties contributed to the delays in
Plaintiff’s treatment). (Id. at 14.) Elsewhere in the order,
however, the WCC states that it “decline[s] . . . at this point
to make a determination of bad faith of either side for their
respective parts in causing the delay,” and that a dispute exists

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as to “whether [Plaintiff] or Century is responsible for the long
delay” in Plaintiff’s spinal cord stimulator treatment. (Id. at
13 n.14.) The WCC makes these statements while also indicating
elsewhere in the order that any future order will focus on the
question of whether Plaintiff has reached maximum medical
improvement or is malingering.5/ (Id. at 14-15.) Thus, it is at
best uncertain whether the WCC intends to revisit the issues of
bad faith and the parties’ respective responsibility for the
delays in Plaintiff’s treatment in a future, final order.
The 12/30/13 Order also found that an independent
medical examination (“IME”) is necessary to determine whether
Plaintiff has reached maximum medical improvement, and “to make a
fresh determination of [Plaintiff’s] status, his prospects, and
his eligibility for continued compensation benefits.” (Id. at 1415.) Thus, the WCC plans to make such a “fresh determination” as
to Plaintiff’s case after reviewing the results of the IME. As
discussed above, the Court acknowledges that there is some
overlap between the predicate factual issues in the instant case
and those underlying the WCC adjudication. It is unclear,
however, whether the WCC’s final, post-IME determination will
involve only Plaintiff’s current status and future prospects, or
will delve into the factual disputes associated with his past

5/

The WCC also spends a considerable amount of the order
discussing Plaintiff’s credibility as a witness. (Id. at 15-22.)
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course of treatment. The 12/30/13 Order is hardly a model of
clarity as to the issues the WCC intends to address in a future,
final order; however, based on what the Court has gleaned from a
review of the 12/30/13 Order, the Court cannot conclude at this
time that any future order issued by the WCC will address any of
the predicate facts relevant to the instant case.
Further, it does not appear likely that the IME ordered
by the WCC 12/30/13 Order will provide factual information
relevant to Plaintiff’s claims here. In its 12/30/13 Order, the
WCC stated that the IME report must address the following issues:
(1) whether Plaintiff has reached maximum medical improvement,
(2) whether the prior spinal implants should be removed, (3)
whether further surgical intervention is recommended, and (4) a
revised treatment plan for Plaintiff, as well as “such additional
matters as the examiner determines may be relevant to
[Plaintiff’s] ongoing treatment.” (Id. at 15.) The IME itself
will thus likely focus on Plaintiff’s current status and
prospects for future treatment. Plaintiff’s claims in the instant
case, however, focus on the past course of conduct between
Plaintiff and Century. Further, in light of the fact that the
hearings officer withdrew from the case in July of 2014, there
will likely be a substantial delay in the adjudication of the WCC
case, even after the IME report is completed. While any final
order issued by the WCC could conceivably address issues beyond

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those contained in the IME, based on the language of the 12/30/13
Order, the Court cannot conclude at this time that the WCC will
address in the future any of the predicate factual issues
relevant to the instant case.
The Ninth Circuit has emphasized that the doctrine of
primary jurisdiction does not “require that all claims within an
agency’s purview . . . be decided by the agency.” Brown v. MCI
WorldCom Network Servs., Inc., 277 F.3d 1166, 1172 (9th Cir.
2002). “Nor is it intended to ‘secure expert advice’ for the
courts from regulatory agencies every time the court is presented
with an issue conceivably within the agency’s ambit.” Id.
(quoting United States v. General Dynamics Corp., 828 F.2d 1356,
1365 (9th Cir. 1987)). Indeed, when determining whether to apply
the doctrine, “the court may take into consideration . . . the
extent to which applying the doctrine could be prejudicial to
either party.” Pac. Lightnet, Inc. v. Time Warner Telecom, Inc.,
318 P.3d 97, 118 (Haw. 2013) “A court should be reluctant to
invoke the doctrine of primary jurisdiction, which often, but not
always, results in added expense and delay to the litigants where
the nature of the action deems the application of the doctrine
inappropriate.” Id. (quoting United States v. McDonnell Douglas
Corp., 751 F.2d 220, 224 (8th Cir. 1984)); see also Ricci v.
Chicago Mercantile Exch., 409 U.S. 289, 321 (1973) (Marshall, J.,
dissenting) (“Wise use of the doctrine necessitates a careful

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balance of the benefits to be derived from utilization of agency
processes as against the costs in complication and delay.”).
Here, the Court concludes that the potentially
substantial delay associated with waiting for a final
adjudication from the WCC more than outweighs any benefit that
might be achieved by the mere possibility of having the WCC
resolve some of the predicate factual issues in the instant suit.
As discussed above, the Court has concluded that it is at best
unclear whether a future WCC order will address any of the
predicate facts in this case. Plaintiff’s claims arise from an
injury suffered in 2003, over ten years ago. (Mot., Ex. 1 at 1.)
The WCC action was commenced in May of 2011, and over two years
elapsed between the August 2011 WCC hearing and the issuance of
the December 30, 2013 Order. (Id. at 3.) Moreover, on July 11,
2014, the hearing officer previously assigned to the WCC case
withdrew, necessitating the appointment of a new hearing officer.
(See Doc. No. 55.) This will undoubtedly cause further delays in
the WCC adjudication. It is therefore conceivable that it may
take several more years before the WCC issues a final order
adjudicating the issues before it. In view of the glacial pace of
the WCC action thus far, and in light of the fact that it is
unclear whether a future WCC order will even address the
predicate factual issues involved in the instant case, the Court
believes that the interests of justice would not be served by

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delaying the instant action, possibly for years, while waiting
for a final WCC order.
The Court therefore declines to apply the primary
jurisdiction doctrine at this time. The Court notes that on July
1, 2014 (before Hearings Officer Mailman withdrew from the WCC
case), at Century’s request, the Court directed Century to file a
petition with the WCC seeking clarification as to the issues the
hearings officer planned to address in a future order. (Doc. No.
50.) Century filed the petition with this Court for its review on
July 10, 2014. (Doc. No. 51.) The Court has reviewed the proposed
petition and has no objection to Century’s filing it with the
WCC, should Century so choose. Further, should Century receive a
response from the WCC indicating definitively that it does intend
to address forthwith factual issues predicate to this Court’s
determinations in the instant suit, Century may at that time file
a motion with this Court reasserting its arguments as to the
appropriateness of the application of the primary jurisdiction
doctrine to the instant suit.
CONCLUSION
For the foregoing reasons, the Court DENIES Century’s
Motion to Dismiss, or in the Alternative, Motion to Stay
Proceedings.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, August 11, 2014.

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________________________________
Alan C. Kay
Senior United States District Judge

O’Neal v. Century Ins. Co., Civ. No. 13-00058 ACK RLP, Order Denying
Defendant’s Motion to Dismiss, or in the Alternative, Motion to Stay
Proceedings.

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