Winnebago Industries, Inc. And Sentry Insurance Vs. Mark Haverly ( 2006 )

IN THE SUPREME COURT OF IOWA
No. 82 / 05-0493
Filed December 1, 2006
WINNEBAGO INDUSTRIES, INC. and SENTRY INSURANCE,
Appellees,
vs.
MARK HAVERLY,
Appellant.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Polk County, Robert A.
Hutchison, Judge.
Claimant in workers’ compensation case won a favorable ruling from
the Workers’ Compensation Commissioner, but the ruling was reversed by
the district court. The claimant appealed, the court of appeals affirmed,
and we granted further review. DECISION OF COURT OF APPEALS
VACATED; JUDGMENT OF DISTRICT COURT REVERSED; CASE
REMANDED.
Christopher D. Spaulding of Berg, Rouse, Spaulding & Schmidt,
P.L.C., Des Moines, for appellant.
Lee P. Hook and Joseph M. Barron of Peddicord, Wharton, Spencer &
Hook, LLP, Des Moines, for appellees.
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LARSON, Justice.
Mark Haverly, who was employed by Winnebago Industries, Inc., filed
a workers’ compensation claim under Iowa Code chapter 85 (2001) and won
a favorable ruling from the Workers’ Compensation Commissioner. On
judicial review, however, the district court reversed the commissioner’s
ruling, and the court of appeals affirmed. On further review, we vacate the
decision of the court of appeals, reverse the judgment of the district court,
and remand.
I. Facts and Prior Proceedings.
Mark Haverly began working for Winnebago in 1983. In 1992 he
suffered a work-related back injury and, in 1997, entered into a settlement
of his workers’ compensation claim. Winnebago provided ongoing medical
care for this back injury. Haverly continued to have back pain and
underwent various courses of treatment, including surgery. On
November 7, 2000, Haverly went to a doctor complaining of increased back
pain, and the doctor recommended conservative treatment. Dissatisfied
with the subsequent care provided by Winnebago, Haverly sought medical
care from Dr. David Beck in February 2002. Dr. Beck recommended
surgery. This surgery, however, was not authorized by Winnebago.
In March 2002 Haverly filed a petition for workers’ compensation
benefits, alleging that a work-related back injury occurred on November 7,
2000. 1 Winnebago responded that any injury sustained on November 7,
2000, related to Haverly’s 1992 injury and, at most, caused a temporary
aggravation of his preexisting back condition.
Because Winnebago did not authorize Haverly to proceed with the
surgery recommended by Dr. Beck, Haverly filed an application for alternate
1Haverlyalso filed a petition alleging that he suffered a work-related back injury on
March 2, 2000. This alleged injury is not at issue on further review.
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medical care on May 17, 2002. See Iowa Code § 85.27; Iowa Admin. Code r.
876—4.48. This petition alleged a November 7, 2000 injury date and
requested that the surgery be provided by Winnebago. Haverly supported
his request with an opinion from Dr. Beck that Haverly’s work duties had
aggravated his preexisting back condition and that surgery was necessary.
Winnebago filed an answer to the request for alternate medical care but, in
its answer, did not dispute liability for the November 7 work injury. (A box
on the answer form stating “employer denies [the claimant’s allegation of
liability]” was not checked by Winnebago’s attorney.) Moreover, at the
hearing on the application for alternate care, Winnebago’s attorney
confirmed that Winnebago was not disputing liability for the injury. A
deputy commissioner granted Haverly’s application for alternate care and
ordered Winnebago to provide the surgery. Agency rules provide no intra-
agency appeal from such orders, and Winnebago did not seek judicial
review.
Haverly’s claim for benefits proceeded to a hearing in 2003. The
deputy commissioner determined, in relevant part, that the issue of liability
for the November 7 injury had been previously “litigated” in the alternate-
medical-care proceeding and that this prior decision was, therefore,
res judicata on the issue of liability. The deputy stated:
[I]njury arising out of and in the course of employment has
been established in a prior contested case proceeding entitled
to the same preclusive effect as is this arbitration proceeding.
Winnebago appealed the arbitration decision on this and several other
grounds. On the intra-agency appeal, the Workers’ Compensation
Commissioner affirmed the deputy’s conclusion that Winnebago’s admission
of liability in the alternate-medical-care proceeding was res judicata on the
issue of liability for benefits. The commissioner also ruled that, even if
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issue preclusion did not prevent Winnebago from litigating the issue, the
record “amply demonstrates” that Haverly suffered a new injury on
November 7, 2000.
Winnebago sought judicial review, challenging the agency’s
res judicata determination, as well as the existence of a new injury. The
district court reversed, ruling that issue preclusion did not apply because
the issue of liability had not been “raised and litigated” in the prior action.
See United Fire & Cas. Co. v. Shelly Funeral Home, Inc., 642 N.W.2d 648,
655 (Iowa 2002). The district court found that Winnebago’s admission of
liability in the alternate-medical-care proceeding was an admission of
liability for medical care only and not an admission of liability for a new
injury.
On appeal, the court of appeals affirmed. The court noted, but
rejected, Haverly’s complaint that the district court’s conclusion permitted
Winnebago to admit liability for the purpose of controlling medical care, but
then deny it for the purpose of determining compensability. The court
concluded that the requirements for issue preclusion were not met and that
neither law-of-the-case nor judicial-estoppel doctrines could be applied to
bar litigation of the liability issue.
Haverly contends Winnebago should not be permitted to admit
liability in the alternate-medical-care proceeding when that worked to its
advantage (by allowing Winnebago to control Haverly’s medical care) and
then reverse its position in the arbitration hearing on the issue of liability
for benefits. The arbitration decision stated a similar view of the case and
questioned Winnebago’s motives in admitting liability in the alternate-
medical-care proceeding. That decision observed
that, under 876 I.A.C. 4.48(7), the expedited procedure [for
alternate medical care] is not available where liability is
disputed. Indeed, [Winnebago] filed a formal answer admitting
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liability on May 29, 2002. At the beginning of the hearing,
[Winnebago’s] attorney was asked directly whether liability was
admitted, and answered just as directly that it was. . . .
The decision in that case [on alternate medical care]
constitutes final agency action and has not been appealed.
[Winnebago], however, ha[s] experienced a change of heart and
now seek[s] to dispute liability. In agency experience, it is not
unheard of for certain employers and insurance carriers to
“admit” liability when there is something to gain thereby (the
right to control medical treatment), yet thereafter attempt to
deny liability as to the case in chief. This litigation offers a
classic example.
On Winnebago’s intra-agency appeal, the commissioner made a
similar observation. While the commissioner did not identify the doctrine of
judicial estoppel by name, he clearly stated the gist of it in this language:
It would be patently unfair to allow an employer to admit
liability and control the medical care for a medical condition
and then allow that employer, after the care is completed to
deny liability and litigate the liability issue, unless there are
good reasons for doing so.
II. The Issues.
Haverly raises a single issue: whether Winnebago is foreclosed from
denying its liability for the November 7, 2000 injury by admitting its liability
in the earlier alternate-medical-care proceeding. He raises three arguments
in support of his appeal: issue preclusion, law of the case, and judicial
estoppel.
III. Standard of Review.
Judicial review of a workers’ compensation decision by the
commissioner is governed by Iowa Code chapter 17A, our Administrative
Procedure Act. See Iowa Code § 86.26. A party challenging agency action
bears the burden of proving both the invalidity of the agency’s action and
resulting prejudice. Iowa Code § 17A.19(8)(a); Hill v. Fleetguard, 705
N.W.2d 665, 671 (Iowa 2005).
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When a district court exercises its authority on judicial review, it acts
in an appellate capacity to correct any errors of law by the agency. Hill, 705
N.W.2d at 669; Heartland Express, Inc. v. Terry, 631 N.W.2d 260, 265 (Iowa
2001). The district court may reverse, modify, or grant other appropriate
relief if substantial rights of the petitioner have been prejudiced. Hill, 705
N.W.2d at 669; Heartland Express, Inc., 631 N.W.2d at 265.
On our review of the district court’s decision, we apply the standards
of chapter 17A to determine if our conclusions are the same as those of the
district court. If so, we affirm; otherwise, we reverse or otherwise modify.
Hill, 705 N.W.2d at 669.
IV. Issue Preclusion.
Haverly argues, and the commissioner ruled, that the issue of
Winnebago’s liability for the November 7 claim had been decided in the
proceeding on Haverly’s application for alternate medical care because
Winnebago conceded the point in its answer. Based on the principle of
issue preclusion, the agency refused to revisit the issue of liability.
The doctrine of res judicata includes both claim preclusion and issue
preclusion. Colvin v. Story County Bd. of Review, 653 N.W.2d 345, 348
(Iowa 2002). In this case, Haverly relies on issue preclusion, also known as
collateral estoppel. See Hunter v. City of Des Moines, 300 N.W.2d 121, 123
n.2 (Iowa 1981). Under issue preclusion, once a court has decided an issue
of fact or law necessary to its judgment, the same issue cannot be
relitigated in later proceedings. Id. at 123. Issue preclusion serves a dual
purpose: to protect litigants from “the ‘vexation of relitigating identical
issues with identical parties or those persons with a significant connected
interest to the prior litigation,’ ” and to further “the interest of judicial
economy and efficiency by preventing unnecessary litigation.” Am. Family
Mut. Ins. Co. v. Allied Mut. Ins. Co., 562 N.W.2d 159, 163 (Iowa 1997)
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(quoting State ex rel. Casas v. Fellmer, 521 N.W.2d 738, 740-41 (Iowa
1994)). Under our four-part test, the doctrine applies to prevent relitigation
if:
(1) the issue determined in the prior action is identical to the
present issue; (2) the issue was raised and litigated in the prior
action; (3) the issue was material and relevant to the
disposition in the prior action; and (4) the determination made
of the issue in the prior action was necessary and essential to
that resulting judgment.
United Fire & Cas. Co., 642 N.W.2d at 655.
The element of issue preclusion of concern in this case is whether the
issue of Winnebago’s liability was “raised and litigated” in the alternate-care
proceeding. Iowa law is clear that issue preclusion requires that the issue
was “actually litigated” in the prior proceeding. Spiker v. Spiker, 708
N.W.2d 347, 353 (Iowa 2006); Hoth v. Iowa Mut. Ins. Co., 577 N.W.2d 390,
391-92 (Iowa 1998); see also Restatement (Second) of Judgments § 27
(“When an issue of fact or law is actually litigated and determined by a valid
and final judgment, and the determination is essential to the judgment, the
determination is conclusive in a subsequent action between the parties,
whether on the same or a different claim.”).
An issue is not actually litigated if the defendant might
have interposed it as an affirmative defense but failed to do so;
nor is it actually litigated if it is raised by a material allegation
of the party’s pleading but is admitted (explicitly or by virtue of
a failure to deny) in a responsive pleading; nor is it actually
litigated if it is raised in an allegation by one party and is
admitted by the other before evidence on the issue is adduced
at trial; nor is it actually litigated if it is the subject of a
stipulation between the parties. A stipulation may, however,
be binding in a subsequent action between the parties if the
parties have manifested an intention to that effect.
Furthermore, under the rules of evidence applicable in the
jurisdiction, an admission by a party may be treated as
conclusive or be admissible in evidence against that party in a
subsequent action.
In the case of a judgment entered by confession, consent,
or default, none of the issues is actually litigated. Therefore,
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the rule of this Section does not apply with respect to any issue
in a subsequent action. The judgment may be conclusive,
however, with respect to one or more issues, if the parties have
entered an agreement manifesting such an intention.
Restatement (Second) of Judgments § 27 cmt. e; see also United States v.
Young, 804 F.2d 116, 118 (8th Cir. 1986) (“A fact established in prior
litigation not by judicial resolution but by stipulation has not been ‘actually
litigated’ and thus is the proper subject of proof in subsequent
proceedings.”); 50 C.J.S. Judgments § 813, at 381 (1997) (“Facts determined
by admissions and stipulations ordinarily are not entitled to collateral
estoppel effect, because facts so determined are not actually litigated,
unless the parties to the stipulation manifest an intent to be bound in a
subsequent action.” (Footnotes omitted.)).
We agree with the court of appeals and the district court that
Winnebago’s admission of liability in the alternate-care proceeding did not
constitute actual litigation for the purpose of applying issue preclusion.
V. Law of the Case.
Haverly also argues that the deputy commissioner’s order requiring
Winnebago to furnish alternate medical care is binding in future
proceedings on that claim. “The doctrine of the law of the case represents
the practice of courts to refuse to reconsider what has once been decided.”
State v. Grosvenor, 402 N.W.2d 402, 405 (Iowa 1987); accord State ex rel.
Goettsch v. Diacide Distrib., Inc., 596 N.W.2d 532, 537 (Iowa 1999).
Pursuant to this principle,
legal principles announced and the views expressed by a
reviewing court in an opinion, right or wrong, are binding
throughout further progress of the case upon the litigants, the
trial court and this court in later appeals.
Grosvenor, 402 N.W.2d at 405; 5 Am. Jur. 2d Appellate Review § 605, at
300-01 (1995).
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The answer to Haverly’s law-of-the-case argument is that the agency
did not decide anything as to Winnebago’s liability for compensation
benefits, but only his right to alternate care. In fact, for reasons we discuss
later, the agency could not decide liability at that stage. See Iowa Admin.
Code r. 876—4.48(7) (2001) (If liability is disputed, the application for
alternate medical care would have to be dismissed.). Our resolution of the
issue regarding Winnebago’s admission of liability in the alternate-care
proceeding is not based on what the agency did or decided at that point, but
what Winnebago did. As such, the law-of-the-case doctrine does not bar
Winnebago’s denial of liability in this case. That brings us to the issue of
judicial estoppel, Haverly’s third argument.
VI. Judicial Estoppel.
Haverly argues that Winnebago is judicially estopped from denying
liability for the November 7, 2000 injury because it conceded that issue in
the alternate-medical-care proceeding. In this case, Haverly did not raise
the issue of judicial estoppel. In fact, it was only mentioned and rejected by
the district court in its ruling on judicial review. However, because judicial
estoppel is intended to protect the integrity of the fact-finding process by
administrative agencies and courts, the issue may properly be raised by
courts, even at the appellate stage, on their own motion. See In re Cassidy,
892 F.2d 637, 641 (7th Cir. 1990); State v. Duncan, 710 N.W.2d 34, 43-44
(Iowa 2006).
Under our cases,
[t]he doctrine [of judicial estoppel] “prohibits a party who has
successfully and unequivocally asserted a position in one
proceeding from asserting an inconsistent position in a
subsequent proceeding.” It is a “common sense” rule, designed
to protect the integrity of the judicial process by preventing
deliberately inconsistent—and potentially misleading—
assertions from being successfully urged in succeeding
tribunals. The doctrine is properly limited in its application to
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cases involving privity with, or prejudice to, the party invoking
the doctrine. Another fundamental feature of the doctrine is
the requirement of proof that the inconsistent position has
been successfully asserted in the prior tribunal. Without such
proof, “application of the rule is unwarranted because no risk
of inconsistent, misleading results exists.”
Wilson v. Liberty Mut. Group, 666 N.W.2d 163, 166 (Iowa 2003) (quoting
Vennerberg Farms, Inc. v. IGF Ins. Co., 405 N.W.2d 810, 814 (Iowa 1987))
(other citations omitted).
The doctrine at issue, although called “judicial” estoppel, is applicable
in administrative, as well as judicial, cases. See Rissetto v. Plumbers &
Steamfitters Local 343, 94 F.3d 597, 604 (9th Cir. 1996).
Unsurprisingly given its name, judicial estoppel is often
articulated as applying to “judicial” proceedings. However,
many cases have applied the doctrine where the prior
statement was made in an administrative proceeding, and we
are not aware of any case refusing to apply the doctrine
because the prior proceeding was administrative rather than
judicial.
Id.; see also Chaveriat v. Williams Pipe Line Co., 11 F.3d 1420, 1427 (7th Cir.
1993) (“Though called judicial estoppel, the doctrine has been applied,
rightly in our view, to proceedings in which a party to an administrative
proceeding obtains a favorable order that he seeks to repudiate in a
subsequent judicial proceeding.”); Charles Alan Wright, et al., Federal
Practice and Procedure § 4477, at 575 (2002) (judicial estoppel applicable to
cases of inconsistent statement made to administrative agency). The
rationale for this principle is that “[a]scertaining the truth is as important in
an administrative inquiry as in judicial proceedings.” Simon v. Safelite
Glass Corp., 128 F.3d 68, 72 (2d Cir. 1997).
Our Wilson case is closely analogous to this one. In Wilson a workers’
compensation claimant settled his case with his employer under the
provisions of Iowa Code section 85.35. As required by that statute, Wilson
admitted there was a bona fide dispute with his employer regarding the
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cause of his injury. His employer’s insurance carrier paid benefits under
the settlement agreement. Wilson then filed a lawsuit against the insurance
carrier for alleged bad-faith failure to settle the claim. Wilson, 666 N.W.2d
at 165.
We held that Wilson was precluded, in a civil action, to claim bad-
faith failure to settle because this was exactly the opposite of what he had
stated in his workers’ compensation settlement agreement, i.e., that there
was a bona fide dispute on liability. Id. at 166-67. We reached that
conclusion on the basis of judicial estoppel because
[p]lainly Wilson’s position in the bad faith action is inconsistent
with the position he asserted in the workers’ compensation
litigation. To prevail on his bad faith claim, Wilson would
necessarily have to prove that Liberty Mutual had no
reasonable basis to deny his claim. Yet in the section 85.35
proceedings before the workers’ compensation commissioner,
Wilson successfully asserted there was a bona fide dispute as
to whether his injuries were work-related so as to entitle him to
additional benefits. These positions are clearly inconsistent.
Id. at 167 (citation omitted).
In Simon a worker told the Social Security Administration he was
unable to work, and the court held he was judicially estopped from later
claiming damages for age discrimination against his employer because his
later claim required proof that he was qualified and able to perform the
duties required for his position. 128 F.3d at 73-74.
In DeGuiseppe v. Village of Bellwood, 68 F.3d 187 (7th Cir. 1995), a
police officer won a disability pension by claiming inability to perform his
duties. He later sued the village for retaliatory discharge. As part of his
retaliatory-discharge suit, the plaintiff was required to show he was not
disabled. DeGuiseppe, 68 F.3d at 191. While the plaintiff contended he was
not disabled, the court said:
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Regardless of whether or not this contention is true, this Court
is not disposed to consider it. Under the doctrine of judicial
estoppel, which “prevents a party who has successfully taken a
position in one litigation from taking the opposite position in a
subsequent litigation,” courts are under no compulsion to heed
the shifting theories of “chameleonic litigants.” Instead, we will
accept a party's prevailing position in previous litigation (or, as
here, quasi-judicial proceedings) as dispositive.
Id. (quoting Czajkowski v. City of Chicago, 810 F. Supp. 1428, 1434 (N.D. Ill.
1992)) (other citation omitted).
In this case, it is understandable why Winnebago admitted liability in
the alternate-care proceeding. If an employer admits liability, it ordinarily
has the right to control the care provided to the employee. Iowa Code
§ 85.27(4). The right to control treatment, however, is lost if the employer
disputes liability. Trade Prof’ls, Inc. v. Shriver, 661 N.W.2d 119, 124 (Iowa
2003). In Trade Professionals we based this conclusion on the Workers’
Compensation Commissioner’s interpretation of an administrative rule.
Under the Iowa Administrative Code,
[a]pplication cannot be filed under this rule [for applying for
alternate care] if the liability of the employer is an issue. If an
application is filed where the liability of the employer is at
issue, the application will be dismissed without prejudice.
Iowa Admin. Code r. 876—4.48(7) (2001).
As we noted in Trade Professionals,
[t]he industrial commissioner has interpreted this section to
mean that,
in Iowa, an employer and its insurer have the right to
control the medical care claimant receives, with two
exceptions. The first is where the employer has denied
liability for the injury. The second is where claimant has
sought and received authorization from this agency for
alternative medical care.
Trade Prof’ls, 661 N.W.2d at 124 (quoting Freels v. Archer Daniels Midland
Co., #1151214 (7/30/2000)).
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We can assume in this case that Winnebago decided to admit liability
for the purpose of maintaining control over Haverly’s care, but rejected any
broader application of that admission because it wanted to challenge its
liability for payment of benefits. Under judicial estoppel, this ordinarily
cannot be permitted. There might, in some cases, be a significant change in
the facts after the admission of liability that could justify a change of
position by the employer, but those facts are not present here.
VII. Conclusion.
For the reasons discussed, we vacate the decision of the court of
appeals, reverse the judgment of the district court, and remand to the
commission for computation of benefits.
DECISION OF COURT OF APPEALS VACATED; JUDGMENT OF
DISTRICT COURT REVERSED; CASE REMANDED.
All justices concur except Hecht, J., who takes no part.