Drews v. EBI Companies

Decision Date11 July 1990
Citation310 Or. 134,795 P.2d 531
PartiesIn the Matter of the Compensation of Walter F. Drews II, Claimant. Walter F. DREWS II, Respondent on Review, v. EBI COMPANIES and Unity Construction, Petitioners on Review. WCB 85-12763; CA A43657; SC S36174.
CourtOregon Supreme Court

James L. Edmunson, Eugene, argued the cause for respondent on review.


FADELEY, Justice.

The issue is whether either issue or claim preclusion applies in this case. An injured worker seeks correction of the amount of temporary total disability benefits (TTD) payable for periods when he was unable to work as a result of an injury. He also seeks a penalty and attorney fees because EBI Companies (EBI), the employer's insurer, did not correct the amount of TTD payments within a reasonable time after EBI was notified of an error in the calculation of the amount of TTD due the worker. EBI asserts that claim preclusion prevents any recovery on account of the incorrect amount of TTD and, perforce, no penalty or attorney fees. We affirm, for different reasons, the Court of Appeals decision which reversed and remanded an Order of the Workers' Compensation Board.

In 1980, a ladder fell on the worker's neck, causing injury, surgery, and time loss in 1981. The employer's report of injury listed $8.50 per hour when $10.50 was the correct hourly wage rate for the injured worker, as the employer later acknowledged. EBI calculated and paid TTD based on the lower rate. A determination order issued in 1981 ordering TTD for a specified time period, "less time worked." No appeal was taken. The worker returned to work.

In 1984, the worker claimed aggravation and need for further surgery. EBI denied the claim but, following a June 13 hearing, on July 24, 1984, a referee allowed it to permit surgery.

When the aggravation claim was allowed to permit further surgery, the referee expressly found that the shoulder condition requiring surgery was related to the industrial accident and that the condition had worsened since the 1981 closure order. The referee in 1984 also ordered future TTD payments as follows:

"ORDERED that EBI Companies, in connection with the aggravation claim remanded to it by the Referee, shall pay claimant temporary total disability benefits [for unspecified future periods] as authorized by [doctor], claimant's treating physician."

Temporary total disability benefits eventually were paid in 1984-85 under that order, but at an erroneously low rate. It is not contended that the worker knew of the error in 1984 but, in any event, he failed to raise the erroneously listed TTD rate at the 1984 hearing which allowed or opened the aggravation claim.

An evaluation of the aggravation claim produced a determination order of October 7, 1985, which allowed temporary total disability for the period starting with the time of surgery and ending June 28, 1985. On October 17, 1985, the worker filed a timely request for hearing, seeking increased permanent partial disability and payment of TTD beyond June 28, 1985. The wage-rate error was discovered by the worker's vocational counselor in the fall of 1985. The injured worker's attorney advised EBI, in writing, of that error and demanded that the correct wage rate be used to recompute the amount of weekly TTD resulting from surgeries in 1984-85. EBI denied that the rate of TTD was incorrect and refused to pay additional amounts of TTD to correct the underpayments for any period. The attorney then added to the hearing request in the aggravation claim proceeding a request for correction of the TTD rate for 1984-85 and for penalty and attorney fees.

A hearing was held in March of 1986 to review requests concerning the 1985 determination However, on reconsideration requested by EBI following an unrecorded telephone conference argument, the referee concluded and ordered as follows:

                order and the TTD requests.  The referee found both that the TTD rate was in error for the 1984-85 period and that EBI should be ordered to pay additional TTD for a number of weeks beyond the ending date provided in the determination order.  The referee also found that the insurer had unreasonably delayed correction of the rate. 1  The referee ordered EBI to pay an attorney fee and penalty of 25 percent of the TTD compensation that the worker had not received in regard to the aggravation claim due to the wage-rate error

"I would have to agree with [insurer's attorney] that the incorrect wage rate was an issue that could have been raised in the prior [June 13, 1984,] hearing and, since it was not, it was then waived. Consequently, the opinion and Order will be amended as follows:

"IT IS HEREBY ORDERED that the Opinion and Order dated April 21, 1986, shall be amended to remove the penalty and attorney fee awarded because the insurer had paid the claimant time loss at an incorrect rate.

IT IS FURTHER ORDERED that the remainder of the Opinion and Order is republished and remain in full force and effect."

In March 1987, the Workers' Compensation Board, without opinion, affirmed the referee's order.

The Court of Appeals reversed and remanded to the Board because a wage rate dispute presents an issue of fact, not a separate "claim" for preclusion purposes. Drews v. EBI Companies, 96 Or.App. 1, 771 P.2d 285 (1989). We affirm the Court of Appeals' reversal of the Board's order because the finality required for preclusion has not yet attached to the aggravation claim.

It is by no means clear from the record that claim or issue preclusion rules are the reason why the referee or the Board denied claimant's request for the penalty and attorney fees. The referee held only that "the incorrect wage rate was an issue which could have been raised in the prior hearing and, since it was not, it was then waived." The Board merely affirmed the referee's order. However, both parties argued to the Board and the Court of Appeals whether the wage-rate error was covered by claim preclusion rules. Drews v. EBI Companies, supra, 96 Or.App. at 3-4, 771 P.2d 285.

The Court of Appeals stated the issue before it in preclusion terms and held that the case involved issue preclusion, but explained its decision by stating that a question of correct wage rate "is an issue of fact, not a claim." Whether preclusion by former adjudication applies to the issue of incorrect TTD rate is properly before this court for decision.


Because decisions use the term "res judicata " inconsistently, it is important to clarify the terminology used here. "Preclusion by former adjudication" is a doctrine of rules and principles governing the binding effect on a subsequent proceeding of a final judgment previously entered in a claim. The term comprises two doctrines: claim preclusion, 2 also known as res judicata, and issue preclusion, 3 also known as collateral estoppel. Some authors use the term res judicata to refer to both subdivisions of former adjudication doctrine. See 1 Restatement (Second) of Judgments 131 (1982) (Introductory Note beginning chapter However, in this opinion and henceforth, we will use the more exact terms "claim preclusion" or "issue preclusion" to denote the respective branches of preclusion by former adjudication. This is merely a choice of nomenclature, not a law change.

3, Former Adjudication: The Effects of a Judicial Judgment).

A. Issue Preclusion

The issue preclusion branch of preclusion by former adjudication, formerly called collateral estoppel, precludes future litigation on a subject issue only if the issue was "actually litigated and determined" in a setting where "its determination was essential to" the final decision reached. 4 North Clackamas School Dist. v. White, 305 Or. 48, 53, 750 P.2d 485, modified 305 Or. 468, 752 P.2d 1210 (1988); Restatement (Second) of Judgments § 17(3) (1982); see also id. at § 27. This court has previously explained issue preclusion as follows:

"If a claim is litigated to final judgment, the decision on a particular issue or determinative fact is conclusive in a later or different action between the same parties if the determination was essential to the judgment." North Clackamas School Dist. v. White, supra, 305 Or. at 53, 750 P.2d 485.

Issue preclusion applies to an issue of either fact or law. Restatement (Second) of Judgments § 27 ("[w]hen 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"). Compare Heller v. Ebb Auto Co., 308 Or. 1, 6, 774 P.2d 1089 (1989) ("[w]ithout any reason to think that the referee was aware of that legal issue, no decision on that issue can be implied from the denial of compensation") with § 27.

The preclusive effect of the rule is subject to exceptions, of which those listed in section 28 of Restatement (Second) of Judgments are illustrative.

B. Claim Preclusion

The claim preclusion branch of preclusion by former adjudication may be stated:

"plaintiff who has prosecuted one action against a defendant through to a final judgment * * * is barred [i.e., precluded] * * * from prosecuting another action against the same defendant where the claim in the second action is one which is based on the same factual transaction that was at issue in the first, seeks a remedy additional or alternative to the one sought earlier, and is of such a nature as could have been joined in the first action." Rennie v. Freeway Transport, 294 Or. 319, 323, 656 P.2d 919 (1982).

Claim preclusion applies equally to a defendant's defense. See Restatement (Second) of Judgments § 18. Claim preclusion does not require actual litigation of an issue of fact or law, as does issue...

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