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BAKSALARY v. SMITH

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA


February 1, 1984

Richard BAKSALARY, William Jones, Morris Tucker, and Charles Samuel Individually and on behalf of all others similarly situated, Plaintiffs,
v.
Paul J. SMITH, C. John Urling, Jr., William J. Sheppard, Grace M. Sloan, The State Workmen's Insurance Fund, Pennsylvania Manufacturers' Association Insurance Company, American Mutual Liability Insurance Company, The School District of Philadelphia, Bituminous Casualty Corporation, and all other insurance carriers and/or self-insured employers similarly situated, Defendants

The opinion of the court was delivered by: POLLAK

LOUIS H. POLLAK, District Judge.

I.

 Plaintiffs initiated this action in 1976, challenging the constitutionality of certain provisions of the Pennsylvania Workmen's Compensation Act, Pa.Stat.Ann. tit. 77, §§ 1-1031 (Purdon 1952 and Supp.1982). In particular, plaintiffs allege that the "automatic supersedeas" provision of section 413 of the Act, Pa.Stat.Ann. tit. 77, § 774 (Purdon Supp.1982), permits employers and insurers to terminate worker's compensation benefits without according due process of law to those whose benefits are terminated, in violation of the Fourteenth Amendment. The automatic supersedeas terminates benefits without notice to the person receiving benefits. It requires only an employer's or insurer's petition reciting that the benefit recipient has returned to work at the same or higher pay or a petition accompanied by a physician's affidavit averring that the recipient has recovered. Plaintiffs make their due process claim in an action under the Civil Rights Act of 1871, 42 U.S.C. § 1983 (Supp. V 1981).

 A decade ago a three-judge panel of this court heard a challenge to section 413's predecessor. In Silas v. Smith, 361 F. Supp. 1187 (E.D.Pa.1973), the court considered the case of an individual whose worker's compensation benefits were terminated by his employer's insurer under the automatic supersedeas provision then in effect. The court found no state action in this termination. The court further stated that even had it found state action, it would not have found a violation of the due process clause. The Silas court, however, faced these questions at a time when employers and employees could opt out of the Pennsylvania Workmen's Compensation Act. Further, the Silas court was not called on to consider the problem of the automatic supersedeas' application to public employees or to employees of employers insured by the State Workmen's Insurance Fund, an insurer administered by state officials. Therefore, as we explain more fully below, the ruling in Silas is not controlling with respect to the claims advanced in the lawsuit now before the court. Because the prior decision in Silas is not controlling here, it was proper that, after this action was commenced, Judge Fogel ordered that "a three-judge court be convened . . . in that, pursuant to 28 U.S.C. §§ 2281 and 2284, the complaint raises substantial constitutional issues and requests as relief the enjoining of the enforcement, operation and execution of a state statute." *fn1"

 On March 27, 1978, an order was entered permitting this case to proceed as a plaintiffs' and defendants' class action under Fed.R.Civ.P. 23(b)(2). The plaintiff class includes "all persons who have been or will be receiving benefits pursuant to the Pennsylvania Workmen's Compensation Act and who have had or will have such benefits terminated, suspended, reduced or otherwise deprived without advance notice and opportunity for a prior evidentiary hearing." The defendant class includes "all insurance companies, mutual associations and employment establishments authorized to insure the payment of Pennsylvania Workmen's Compensation benefits who have acted, or will act, to terminate, suspend, reduce, or otherwise deprive benefits to previously eligible claimants without advance notice and opportunity for a prior evidentiary hearing . . . ."

 Discovery proceeded for five years. Then, after a series of conferences, the court ordered the parties to submit a set of stipulations during the summer of 1982. Plaintiffs presented their evidence by way of stipulations and affidavits in November. Defendants then moved for involuntary dismissal pursuant to Fed.R.Civ.P. 41(b). This court heard oral argument on April 7, 1983. At that time, we deferred decision on the 41(b) motion until defendants' evidence had been submitted. Defendants then put in their evidence by stipulations and affidavits. Because plaintiffs offered no rebuttal evidence, the entire case was before us for decision on the merits. This opinion constitutes our findings of fact and conclusions of law.

 II.

 This case involves a challenge to one of the methods by which an employer or insurer obligated to pay benefits under the Pennsylvania Workmen's Compensation Act can cease paying those benefits. Through a set of procedures not pertinent to this action, an individual covered by the Act and injured in the course of his employment can obtain the right to receive weekly benefits payments from his employer. The employer must insure against this obligation. Pa.Stat.Ann. tit. 77, § 501 (Purdon Supp.1982); Stipulations of Fact para. 16. This requirement may be satisfied in one of three ways: (1) the employer may retain a private insurance carrier licensed to provide worker's compensation insurance; (2) the employer may insure through the State Workmen's Insurance Fund, an insurance fund administered by the state; (3) the employer may self-insure. Id. When an employer purchases insurance, the insurer assumes all of the employer's liabilities under the Act and, in effect, stands in the employer's shoes with respect to the employees receiving worker's compensation. See Pa.Stat.Ann. tit. 77, §§ 501, 701 (Purdon Supp.1982); Cease v. Thomas, 155 Pa. Super. 215, 38 A.2d 547 (1944). Thus, in the ordinary case of an insured employer, the employer has little to do with a compensation matter once the insurer has begun to pay compensation benefits.

 When a self-insured employer or an insurer believes that an injured employee who receives compensation benefits has resumed work or recovered his or her health, the employer or insurer will typically seek to terminate the employee's worker's compensation benefits. If the employee does not agree to a termination of his benefits, the employer or insurer files a petition to terminate or modify the compensation with the agency which administers the worker's compensation program, the Bureau of Worker's Compensation. Pa.Stat.Ann. tit. 77, § 772 (Purdon Supp.1982). A referee from the Bureau then holds hearings to determine whether grounds for termination or modification exist.

 Section 413 of the Act, the subject of this lawsuit, deals with the right to compensation between the time an employer or insurer petitions for termination or modification and the time the referee makes a final determination. Section 413, in pertinent part, provides:

 

The filing of a petition to terminate or modify a notice of compensation payable or a compensation agreement or award as provided in this section shall operate as a supersedeas, and shall suspend the payment of compensation fixed in the agreement or by the award, in whole or to such extent as the facts alleged in the petition would, if proved, require only when such petition alleges that the employe has returned to work at his prior or increased earnings or where the petition alleges that the employe has fully recovered and is accompanied by an affidavit of a physician on a form prescribed by the [Bureau of Worker's Compensation] to that effect which is based upon an examination made within fifteen days of the filing of the petition. In any other case, a petition to terminate or modify a compensation agreement or other payment arrangement or award as provided in this section shall not automatically operate as a supersedeas but may be designated as a request for a supersedeas, which may then be granted at the discretion of the referee hearing the case.

 Pa.Stat.Ann. tit. 77, § 774 (Purdon Supp.1982).

 Thus, in two sorts of cases an employee receiving benefits can have his benefits terminated pending disposition of his employer's or his employer's insurer's petition to terminate or modify those benefits. The first sort of case is one where the petition alleges that the employee has returned to work at the same or higher wages. The second sort of case is one where the petition alleges that the employee has fully recovered from his disability and the petition is accompanied by a doctor's affidavit averring recovery based upon an examination of the employee within the previous fifteen days.

 In either of the two automatic supersedeas situations, the filing of the petition suspends the employer's or insurer's obligation forthwith. Before the employer or insurer can successfully file the petition, however, clerical personnel of the Bureau promptly review the petition

 

to determine whether [it has] been properly completed and [complies] in form with the requirements of the [Act] and the Bureau's own rules and regulations. If any deficiency as to form is found, the Bureau rejects the petition and returns it, with notice of the nature of any defect, for correction by the party.

 Stipulations of Fact para. 51. This review is addressed to formal issues and involves no consideration of the merits of the petition. Stipulations of Fact para. 52.

 The filing employer or insurer need not serve the employee with a copy of the petition either before or after filing. Instead, the Bureau sends the employee notice of the petition, after filing, at the time (usually no more than five days after receipt of the petition) that the Bureau assigns the matter to a referee. Stipulations of Fact paras. 53, 54.

 The employee has no avenue to contest application of the automatic supersedeas other than his defense on the merits of the petition before the referee. Referees typically take one year or more to decide contested cases. Stipulations of Fact para. 63. Even if he ultimately has his benefits restored retroactively, an employee subject to an automatic supersedeas will find himself without worker's compensation benefits from the time that the Bureau of Worker's Compensation performs its clerical review of his employer's or insurer's petition until the time a referee decides the case. Plaintiffs contend that this constitutes a deprivation of that employee's property interest in his compensation benefits without according the employee due process of law.

 We have permitted this action to proceed as both a plaintiffs' and defendants' class action. The plaintiff class includes those as to whom the automatic supersedeas provision has been or may be invoked. The defendant class includes all those who have invoked or may invoke the automatic supersedeas. Delimination of these classes requires explanation of the Workmen's Compensation Act's coverage.

 The Act covers all "employees" of "employers." An "employee" is defined as any non-casual worker who performs service for another under the other's control. Pa.Stat.Ann. tit. 77, § 22 (Purdon Supp.1982). The Act excludes elected officers of the state or any of its political subdivisions, id., and domestic workers, Pa.Stat.Ann. tit. 77, § 676 (Purdon Supp.1982). "Employers" include "natural persons, partnerships, joint-stock companies, corporations for profit, corporations not for profit, municipal corporations, the Commonwealth, and all governmental agencies created by it." Pa.Stat.Ann. tit. 77, § 21 (Purdon 1952). The Act does not cover federal workers.

 

To the extent it applies, the [Act] covers all injuries or occupational diseases occurring in Pennsylvania, regardless of the place of hire. The Act also applies to injuries incurred outside of the Commonwealth where the employee is: (1) principally employed in Pennsylvania; (2) hired in Pennsylvania with employment not principally localized in any state; (3) hired in Pennsylvania with employment principally localized in another state which does not cover that injury in its own workers' compensation law; or (4) hired in Pennsylvania for employment outside the United States or Canada.

 Stipulations of Fact para. 5.

 Before 1974, employees and employers had the option of declining coverage under the Act. Employers and employees were presumed to accept application of the Act. They could, however, file a notice with the Bureau and avoid the Act's application to their employment relationship. Pa.Stat.Ann. tit. 77, §§ 461, 462 (Purdon 1952) (repealed and replaced with unrelated language 1974). The Pennsylvania Legislature has since made the statute mandatory. Act No. 263, § 5, 1974 Pa.Laws 782, 784, codified at Pa.Stat.Ann. tit. 77, § 461 (Purdon Supp.1982). Thus, all possible class members are in fact class members in this action.

 This case now has four remaining individual plaintiffs who represent the class. Richard Baksalary *fn2" injured his left achilles tendon while working for the Midvale-Heppenstall Company. Midvale-Heppenstall had insured with the Pennsylvania Manufacturers' Association Insurance Company ("PMAIC") which paid compensation benefits to Mr. Baksalary from December 27, 1973, until June 12, 1974. On the basis of a June 11 examination by one Dr. Cassidy, PMAIC filed a first petition for termination of Mr. Baksalary's compensation benefits on July 19, 1974, invoking the automatic supersedeas. On August 2, however, PMAIC again began to pay Mr. Baksalary's benefits. Then, on October 25, PMAIC again reversed its field, and stopped paying Mr. Baksalary. On November 22, PMAIC filed a second petition for termination alleging that Mr. Baksalary had recovered as of June 11. PMAIC attached an affidavit of Dr. Cassidy and again invoked the automatic supersedeas. Mr. Baksalary first received notice of the November 22 filing on December 4. Three years later, on December 1, 1977, a referee determined that PMAIC had been on sound ground in discontinuing the payment of benefits to Mr. Baksalary but that it still remained liable for any treatment costs related to Mr. Baksalary's injury, subject to a credit for benefit payments made after June 11, 1974.

  Plaintiff William Jones *fn3" suffered an injury while employed as a truck driver for the Tri-County Hauling Company. American Mutual Liability Insurance Company insured Tri-County against worker's compensation liability. Mr. Jones and American Mutual entered an agreement for payment of compensation benefits beginning on December 5, 1973. American Mutual stopped paying benefits on May 5, 1974, and filed a petition to terminate Mr. Jones' benefits on June 11. Based upon a physician's affidavit that an examination of May 29 showed Mr. Jones' recovery, American Mutual invoked the automatic supersedeas at the time of its June 11 petition. The Bureau of Worker's Compensation mailed notice of Mr. Jones' termination on June 16. Three years later, on August 11, 1977, a referee found that Mr. Jones had not recovered in May of 1974, and ordered American Mutual to pay retroactive benefits to Mr. Jones with interest at ten percent per annum.

 Morris Tucker *fn4" injured his back while packing meat for S. Lotman & Sons, Inc. Bituminous Casualty Corporation insured Lotman. Bituminous and Mr. Tucker agreed that Bituminous owed Mr. Tucker compensation payments beginning November 9, 1973. On July 17, 1974, Bituminous filed a petition to terminate Mr. Tucker's benefits and invoked the automatic supersedeas. Bituminous had not attached a physician's affidavit, but had typewritten on the petition that "J. David Hoffman, M.D. certifies that Morris T. Tucker was able to return to work on July 3, 1974." This apparently sufficed, because Bituminous paid nothing to Mr. Tucker until a referee issued a decision on August 21, 1975, in favor of Mr. Tucker. Bituminous appealed that decision, but the parties settled on December 19, 1977. During the period of his termination, Mr. Tucker received income from welfare, Social Security Disability Insurance, and his wife's employment.

 Charles Samuel had two experiences with the automatic supersedeas provision of section 413. *fn5" Mr. Samuel worked for the Pennsylvania Liquor Control Board when he hurt his back. The State Workmen's Insurance Fund ("SWIF") insured the Liquor Control Board. As described more fully in section III(B)(2)(b) of our opinion, "S.W.I.F. is a legislatively created and state-operated insurance carrier from which workers' compensation insurance policies may be purchased by employers to cover all risks of liability under the Act, including employers who have been rejected or cancelled by private insurance carriers." Stipulations of Fact para. 22.

 SWIF began paying compensation to Mr. Samuel as of February 28, 1975. SWIF first terminated these payments on October 7, 1975, on the basis of an examination of Mr. Samuel by Dr. Williams. SWIF petitioned to terminate Mr. Samuel's compensation on October 17 and invoked the automatic supersedeas. The first notice that Mr. Samuel received of the petition was a copy mailed to him by the Bureau on November 7. A referee denied SWIF's petition and awarded retroactive compensation benefits with interest almost eleven months later, on September 20, 1976.

 On June 27, 1977, SWIF again filed a petition to terminate Mr. Samuel's benefits. SWIF attached the affidavit of Dr. Stiffel, who had conducted an examination on June 21, and SWIF invoked the automatic supersedeas. A copy of this petition was mailed to Mr. Samuel on July 1. A referee denied SWIF's petition on January 5, 1978, and SWIF appealed. SWIF did not resume payments until the administrative appeal board remanded the case to the referee on April 10, 1978. The referee clarified his January 5, 1978, order on March 19, 1979, to award Mr. Samuel retroactive benefits and ten percent per annum interest.

 III.

 A claim under section 1983 alleging a violation of the due process clause of the Fourteenth Amendment requires proof of three elements. First, a section 1983 claimant must show a deprivation of a constitutionally protected liberty or property interest. Second, the claimant must show that the deprivation was accomplished "under color of state law" and as a result of "state action;" these turn out to mean the same thing. Third, the claimant must show that the method by which the deprivation was effectuated involved a denial of due process -- in this case, procedural due process. We proceed to consider each of these elements in turn.

 A. Deprivation

 As we discussed in the previous portion of this opinion, section 413 permits an employer or insurer summarily to suspend worker's compensation payments to an injured employee formerly entitled to those benefits. The employee may protest this suspension and he may obtain a hearing before a referee. The referee may, of course, determine that the employee was no longer entitled to benefits at the time of the petition. *fn6" However, the referee may find that the employee had a continuing disability or that he had not returned to work. This finding would dictate a decision that the employer or insurer should not have terminated the employee's benefits. In that case, the referee will award the payment of retroactive benefits under Pa.Stat.Ann. tit. 77, § 772 (Purdon Supp.1982). Referees, though, typically take one year or more to decide a case. Stipulations of Fact para. 63.

 We find that when an individual must forego the use of his compensation benefits for as long as one year, even if he receives reimbursement at the end of that period, *fn7" that individual has undergone the deprivation of a constitutionally protected property interest. During the period of termination, he has lost significant income. He will find this income difficult to replace through borrowing in the market because he has no way of convincing a lender that a referee will eventually award benefits to him; most lenders are likely to assume otherwise. In a similar case involving termination of Social Security Disability Insurance benefits pending a final hearing, the Supreme Court stated that it "has been implicit in our prior decisions . . . that the interest of an individual in continued receipt of these benefits is a statutorily created 'property' interest protected by the Fifth Amendment." Mathews v. Eldridge, 424 U.S. 319, 332, 96 S. Ct. 893, 901, 47 L. Ed. 2d 18 (1976) (citations omitted). *fn8" We see no distinction for this purpose between the federal disability benefits at issue in Mathews and the state disability benefits at issue in this case. *fn9"

 B. State Action

 The Civil Rights Act of 1871 creates a private right of action against

 

every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or territory or the District of Columbia, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws. . . .

 42 U.S.C. § 1983 (Supp. V 1981). Plaintiffs here complain that the automatic supersedeas fails to accord them their constitutional right to due process before depriving them of their property interest. Because the Fourteenth Amendment creates this due process right, the right only runs against a "state." Thus, plaintiffs must show a deprivation by defendants which satisfies both section 1983's "under color of state law" requirement and the Fourteenth Amendment's "state action" requirement. The Supreme Court has stated, however, that "if the challenged conduct . . . constitutes state action as delimited by our prior decisions, then that conduct was also action under color of state law and will support a suit under § 1983." Lugar v. Edmondson Oil Co., 457 U.S. 922, 935, 102 S. Ct. 2744, 2753, 73 L. Ed. 2d 482 (1982); accord Jackson v. Temple University, 721 F.2d 931, 932-933 (3d Cir. 1983); Community Medical Center v. Emergency Medical Services, 712 F.2d 878, 879 n. 3 (3d Cir.1983). We therefore need only embark on one unified inquiry for purposes of the due process clause and section 1983.

 Our primary guidance in that inquiry comes from three recent Supreme Court opinions. See Lugar v. Edmondson Oil Co., 457 U.S. 922, 102 S. Ct. 2744, 73 L. Ed. 2d 482 (1982); *fn10" Rendell-Baker v. Kohn, 457 U.S. 830, 102 S. Ct. 2764, 73 L. Ed. 2d 418 (1982); *fn11" Blum v. Yaretsky, 457 U.S. 991, 102 S. Ct. 2777, 73 L. Ed. 2d 534 (1982). *fn12" Since the Supreme Court's state action trilogy, the Court of Appeals for the Third Circuit has given some further guidance *fn13" on the issue of state action. See Jackson v. Temple University, 721 F.2d 931 (3d Cir.1983); *fn14" Nguyen v. United States Catholic Conference, 719 F.2d 52 (3d Cir.1983); *fn15" Community Medical Center v. Emergency Medical Services, 712 F.2d 878 (3d Cir.1983). *fn16"

 Lugar has particular relevance to this case. In Lugar the Court refined the "close nexus" analysis propounded in Jackson v. Metropolitan Edison Co., 419 U.S. 345, 95 S. Ct. 449, 42 L. Ed. 2d 477 (1974). The Lugar court divided state-action analysis into two parts:

 

First, the deprivation must be caused by the exercise of some right or privilege created by the state or by a rule of conduct imposed by the state or by a person for whom the state is responsible. . . . Second, the party charged with the deprivation must be a person who may fairly be said to be a state actor.

 457 U.S. at 937, 102 S. Ct. at 2754. We begin our analysis of state action by considering Lugar 's first prong. We then move on to the more difficult question whether employers and insurers who invoke section 413's automatic supersedeas "may fairly be said to be . . . state actor[s]."

 (1) State-created right or privilege

 An employer or insurer who believes that an employee receiving worker's compensation benefits has completely recovered or has returned to work at the same or higher pay must nevertheless continue to pay compensation benefits unless the employer or insurer qualifies for a supersedeas under section 413. In order to qualify for an automatic supersedeas, the employer or insurer must file a petition with the Bureau of Worker's Compensation (a) accompanied by the affidavit of a doctor averring complete recovery or (b) reciting that the employee has returned to work at a wage at least equalling his prior wage. If an employer or insurer suspends compensation payments without qualifying for this automatic supersedeas and without a referee's adjudication, the employer or insurer becomes liable for penalties of ten, or even twenty, percent of the withheld payments. Pa.Stat.Ann. tit. 77, § 774.1 (Purdon Supp. 1982).

 Termination through invocation of the automatic supersedeas provision, then, constitutes "the exercise of some right or privilege created by the state." In that sense, this case resembles Lugar v. Edmondson Oil Co., 457 U.S. 922, 102 S. Ct. 2744, 73 L. Ed. 2d 482 (1982); in both cases the deprivation requires a special filing process specifically created by the state.

 The automatic supersedeas provision does not merely codify the ordinary way of doing things, as the Court characterized section 7-210 of the New York Uniform Commercial Code in Flagg Brothers, Inc. v. Brooks, 436 U.S. 149, 98 S. Ct. 1729, 56 L. Ed. 2d 185 (1978). Section 7-210 allowed a warehouseman to sell goods in his possession to satisfy his lien, remitting the owner of the goods to asserting in a subsequent lawsuit any claim that the warehouseman had no proper lien. The Court rejected a claim that section 7-210 was unconstitutional in authorizing a transfer of the owner's goods to a third person without a hearing. The Court reasoned that the challenged application of section 7-210 involved no state action because, among other things, section 7-210 did not substantially change the state's relation to the transaction. *fn17" By contrast, absent the automatic supersedeas provision, an employer or insurer could not terminate an individual's benefits without a referee's adjudication. If the employer or insurer did so terminate, the Workmen's Compensation Act would not only award damages, but would also impose penalties.

 (2) State Actor

 Having found that section 413 satisfies Lugar 's first prong, we now turn to the second requirement that "the party charged with the deprivation must be a person who may fairly be said to be a state actor." 457 U.S. at 937, 102 S. Ct. at 2754. In analyzing this requirement, we have found it useful to distinguish four sorts of employers and insurers who may invoke the automatic supersedeas provision of section 413.

 First, we consider the government as an employer. The Act covers employees of the Commonwealth and of local governmental entities by virtue of Pa.Stat.Ann. tit. 77, § 21 (Purdon 1952), which defines "employer" to include "the Commonwealth, and all governmental agencies created by it." Public employers may choose not to insure against their worker's compensation liability under the Act. For example, counsel represented to us at argument that the Pennsylvania Turnpike Commission self-insures. Tr. of Oral Arg. at 23. Thus, in section III(B)(2)(a) of this opinion, we consider whether self-insuring public employers are state actors.

 Most public employers, however, insure through the State Workmen's Insurance Fund ("SWIF"), an insurer administered by the State Workmen's Insurance Board. See Pa.Stat.Ann. tit. 77, § 221 (Purdon Supp.1982). Section III(B)(2)(b) of this opinion considers whether SWIF is a state actor when it invokes the automatic supersedeas provision on behalf of a public employer.

 Private employers can also insure through SWIF. Section III(B)(2)(c) of this opinion considers whether SWIF is a state actor when it invokes section 413 on behalf of a private employer.

  Finally, section III(B)(2)(d) considers whether a private insurer or a self-insuring private employer is a state actor when it invokes the automatic supersedeas provision.

 (a) Self-Insured Public Employers

 State action exists when a self-insured public employer invokes section 413's automatic supersedeas procedure. By inquiring whether a state-created procedure involving a state actor worked a particular deprivation, Lugar 's two-pronged test seeks to identify that conduct "fairly attributable to the state." 457 U.S. at 937, 102 S. Ct. at 2754; accord Rendell-Baker v. Kohn, 457 U.S. at 838, 102 S. Ct. at 2770; Blum v. Yaretsky, 457 U.S. at 1004, 102 S. Ct. at 2786 ("The purpose of this requirement is to assure that constitutional standards are invoked only when it can be said that the State is responsible for the specific conduct . . . ."); Nguyen v. United States Catholic Conference, 719 F.2d 52, 54 (3d Cir.1983); Community Medical Center v. Emergency Medical Services, 712 F.2d 878, 879 (3d Cir.1983). However, the two aspects of the test "collapse into each other when the claim of a constitutional deprivation is directed against a party whose official character is such as to lend the weight of the state to his decisions." Lugar, 457 U.S. at 937, 102 S. Ct. at 2754. Thus, when a state agency or a local government invokes section 413 against one of its employees, the state is the actor.

 (b) Public Employers Insured by SWIF

 The analysis becomes slightly more complicated when a public employer insures through SWIF. Under Pennsylvania practice, the insurer, and not the employer, becomes the party responsible for payment of compensation benefits, see Cease v. Thomas, 155 Pa.Super. 215, 38 A.2d 547 (1944), and thus the insurer becomes the party which will actually invoke the automatic supersedeas.

 At oral argument, counsel for the Commonwealth defendants seemed to concede that when SWIF acted on behalf of a public employer, state action existed. Tr. of Oral Arg. at 20. We give this concession close consideration because recent precedents cast some doubt on the existence of state action when a government agency "contracts out" its responsibilities. See Rendell-Baker v. Kohn, 457 U.S. 830, 102 S. Ct. 2764, 73 L. Ed. 2d 418 (1982) (education for disturbed students); Nguyen v. United States Catholic Conference, 719 F.2d 52 (3d Cir.1983) (payment of relief funds to refugees); cf. White v. Massachusetts Council of Construction Employers, 460 U.S. 204, 103 S. Ct. 1042, 75 L. Ed. 2d 1 (1983) (city which will only hire contractors who themselves hire half their workers from the city does not violate the commerce clause).

 The State Workmen's Insurance Fund strongly argues that it is not a state agency and therefore does not have an "official character . . . such as to lend the weight of the state to [its] decisions." Lugar, 457 U.S. at 937, 102 S. Ct. at 2754. We disagree.

 SWIF's argument proceeds from the limitation on the state's liability for claims on the fund to the assessments and premiums paid by insured employers. See Pa.Stat.Ann. tit. 77, § 221 (Purdon Supp.1982). But that same sentence provides that "such Fund shall be administered by the [State Workmen's Insurance] Board. . . ." Id. The Board consists of the Commissioner of Labor and Industry, the Insurance Commissioner, and the State Treasurer. Pa.Stat.Ann. tit. 77, § 211 (Purdon 1952). Further,

 

the officers and employes of the State Workmen's Insurance Board created by the act to which this is a supplement shall be deemed and held to be, for all purposes whatsoever, officers and employes of the Commonwealth of Pennsylvania, and shall be entitled to and have and exercise all the rights, powers, and privileges, and be subject to all the duties, restrictions, and penalties, of other officers and employes of the Commonwealth.

 Pa.Stat.Ann. tit. 77, § 381 (Purdon 1952).

 In short, three high state officials, collectively constituting the State Workmen's Insurance Board, have sole supervision of SWIF's administration. Moreover, these officials and their Board employees are "for all purposes whatsoever, officers and employees of the Commonwealth of Pennsylvania. . . ." They are subject to all the restrictions of other officers and employees of the Commonwealth. These restrictions include the Fourteenth Amendment. Therefore, we find that when SWIF acts, the state acts. See Pennsylvania v. Board of Trusts, 353 U.S. 230, 77 S. Ct. 806, 1 L. Ed. 2d 792 (1957); Pennsylvania v. Brown, 392 F.2d 120 (3d Cir.1968), cert. denied, 391 U.S. 921, 88 S. Ct. 1811, 20 L. Ed. 2d 657 (1968).

 (c) Private Employers Insured by SWIF

 Although counsel for the Commonwealth seems to have drawn a distinction between SWIF acting as insurer for a public employer and SWIF acting as insurer for a private employer, our analysis in the preceding subsection leads to the conclusion that SWIF acts for the state whenever it acts. Accordingly, the force of that argument requires us to find that state action exists when SWIF invokes the automatic supersedeas provision of section 413 even when SWIF does so on behalf of a private employer.

 (d) Private Insurers and Self-Insured Private Employers

 We have found state action, then, whenever a public entity insures itself and whenever either a public or private employer uses SWIF to insure. In any of these cases, invocation of the automatic supersedeas by the self-insuring public employer or by the public insurer is "fairly attributable to the state" because the state itself invokes section 413. We cannot base our conclusion on this ground, however, when a private insurer or employer uses section 413.

 We note initially that Silas v. Smith, 361 F. Supp. 1187 (E.D.Pa.1973), dealt with the private employer/private insurer situation. See our discussion at p. 219, supra. The Silas court found no state action in a private insurer's invocation of the automatic supersedeas. *fn18" The Pennsylvania Commonwealth Court was assessing the private employer/private insurer situation when, in reliance on Silas, it found the current section 413 constitutionally acceptable. Henderson v. Workmen's Compensation Appeal Bd. (Rockwell International), 69 Pa. Commw. 613, 452 A.2d 277 (1982), petition for allowance of appeal denied (Pa. March 8, 1983); see also Commonwealth Dept. of Labor and Industry v. Workmen's Compensation Appeal Bd., 58 Pa.Commw. 413, 416 n. 3, 427 A.2d 1277, 1278 n. 3 (1981) (citing Silas for the proposition that notice and a hearing are not required for an automatic supersedeas in a case involving a private insurer). We do not find these precedents dispositive here. *fn19"

 We hold that invocation of section 413's automatic supersedeas provision by a private insurer or by a private employer involves state action. The Supreme Court has "consistently held that a private party's joint participation with state officials in the seizure of disputed property is sufficient to characterize that party as a 'state actor' for purposes of the Fourteenth Amendment." Lugar, 457 U.S. at 941, 102 S. Ct. at 2756. "In this context 'joint participation' [does not require] something more than invoking the aid of state officials to take advantage of state created attachment procedures." 457 U.S. at 942, 102 S. Ct. at 2756.

 In order to invoke the automatic supersedeas, an insurer or employer must file a petition on a form provided by the state. A state agency, the Bureau of Worker's Compensation, must review the petition before the supersedeas may take effect. Although the Bureau does not review the petition's merits, it does review the petition for formal compliance with the Workmen's Compensation Act; the Bureau has a form for returning inadequate petitions. Unless the insurer or employer satisfies the Bureau of the petition's compliance with section 413, the insurer or employer cannot terminate the employee's benefits. Further, the insurer/employer relies on the Bureau to notify the employee of the termination of benefits. *fn20"

 Section 413's automatic supersedeas procedure requires a filing with the Bureau of Worker's Compensation. This filing is sufficient to constitute "joint participation" and to subject private invocation of the automatic supersedeas to the due process clause. *fn21"

 (C) Due Process

 Having decided that benefits terminations under section 413's automatic supersedeas provision must comply with the Fourteenth Amendment, we now consider whether section 413 accords plaintiffs sufficient process to constitute due process. See, e.g., Perri v. Aytch, 724 F.2d 362 at 366, (3d Cir. Dec. 22, 1983) ("Even though Perri had a property interest in her probationary employment, she must still demonstrate that she was deprived of the interest without due process of law.") We agree with the Supreme Court of Iowa that Mathews v. Eldridge, 424 U.S. 319, 96 S. Ct. 893, 47 L. Ed. 2d 18 (1976), makes the automatic supersedeas unconstitutional. See Auxier v. Woodward State Hospital-School, 266 N.W.2d 139 (Iowa 1978), cert. denied, 439 U.S. 930, 99 S. Ct. 319, 58 L. Ed. 2d 324 (1979) (holding Iowa version of section 413 unconstitutional). *fn22"

 In Mathews, the Supreme Court held that the Social Security Administration need not provide an evidentiary hearing before terminating an individual's Social Security Disability Insurance benefits. Cf. Goldberg v. Kelly, 397 U.S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d 287 (1970) (requiring pretermination evidentiary hearing for recipient of AFDC). The Court concluded in Mathews that disability insurance recipients threatened with a loss of benefits were accorded a sufficient pretermination process, albeit that process was not of a formal evidentiary nature, so that an evidentiary hearing could be postponed until after termination.

 The Social Security procedure provided that

 

whenever the agency's tentative assessment of the beneficiary's condition differs from his own assessment, the beneficiary is informed that benefits may be terminated, provided a summary of the evidence upon which the proposed determination to terminate is based, and afforded an opportunity to review the medical reports and other evidence in his case file. He may also respond in writing and submit additional evidence.

 424 U.S. at 337-338, 96 S. Ct. at 904 (footnote omitted); see also Washington v. Secretary of Health and Human Services, 718 F.2d 608, 609-610 (3d Cir.1983) (describing waiver of these procedural protections). The procedures sustained in Mathews were perceived by the Court as "providing the claimant with an effective process for asserting his claim prior to any administrative action. . . ." 424 U.S. at 349, 96 S. Ct. at 909-910. In marked contrast, section 413 provides no notice whatsoever until after the termination of benefits pending a final hearing. *fn23"

 IV.

 The foregoing discussion has led us to the conclusion that operation of the automatic supersedeas authorized by section 413 of the Pennsylvania Workmen's Compensation Act involves conduct reasonably attributable to the state and that section 413 does not accord worker's compensation recipients due process. Thus, plaintiffs have made out a violation of 42 U.S.C. § 1983 (Supp. V. 1981). Plaintiffs are entitled to entry of a judgment declaring the unconstitutionality of the automatic supersedeas provision of section 413.

 Invalidation of the automatic supersedeas provision does not call for invalidation of any other provision of the Workmen's Compensation Act, even though the Act contains no severability provision. "Under Pennsylvania law, separate provisions of a statute are presumed severable, and any particular one will survive a decision voiding another unless it is so interrelated with the void provision or incomplete without it that the legislature could not have intended it to stand alone." Stoner v. Presbyterian Hospital, 609 F.2d 109, 112 (3d Cir.1979) (citing 1 Pa.Cons.Stat.Ann. § 1925). *fn24"


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