Fremont Indem. Co. v. Industrial Com'n of Arizona, 17799-PR

Citation144 Ariz. 339,697 P.2d 1089
Decision Date27 March 1985
Docket NumberNo. 17799-PR,17799-PR
PartiesFREMONT INDEMNITY COMPANY and The Estes Company, Petitioners, v. The INDUSTRIAL COMMISSION OF ARIZONA, Respondent, Brian Mingin, Respondent Employee.
CourtSupreme Court of Arizona

Jones, Skelton & Hochuli by Calvin Harris and Jeffrey B. Miller, Phoenix, for petitioners.

Sandra Day, Chief Counsel, Indus. Com'n of Arizona, Phoenix, for respondent.

Davis, Eppstein & Hall, P.C. by Philip J. Hall, Tucson, for respondent employee.

CAMERON, Justice.

This is a petition for review of an opinion and decision of the Court of Appeals setting aside a workers' compensation award made to respondent (claimant) by the Industrial Commission of Arizona. Fremont Indemnity Co. v. Industrial Commission 144 Ariz. 350, 697 P.2d 1100 [1984]. We have jurisdiction pursuant to Art. 6, § 5(3) of the Arizona Constitution, A.R.S. § 12- 120.24 and Rule 23, Arizona Rules of Civil Appellate Procedure, 17A A.R.S.

Two issues are presented for review:

1. For purposes of unscheduling an otherwise scheduled disability award, what effect, if any, may the Industrial Commission give to a New Jersey determination that the petitioner has suffered a prior industrial disability?

2. Assuming the New Jersey determination may be recognized in Arizona, has petitioner proven a loss of earning capacity caused by such disability?

The facts of this case are essentially not in dispute. In 1973, the claimant, while living and working in New Jersey, injured his back performing duties within the course and scope of his employment. In 1975, the New Jersey Department of Labor and Industry, Division of Workmen's Compensation, entered a judgment and awarded benefits based upon its finding that the claimant had sustained an 11% permanent, partial disability. It is undisputed that this disability would have been unscheduled had the injury occurred in Arizona. The claimant subsequently moved to Arizona and commenced employment.

In 1980, the claimant injured his knee while working in Tucson for the Estes Company (the employer). He filed a workmen's compensation claim. The employer's insurance carrier, Fremont Indemnity Co. (the carrier), awarded the claimant benefits based upon a finding that he had sustained a scheduled 15% permanent, partial disability. The claimant then requested a hearing to urge that his Arizona injury be reclassified as unscheduled. His contention was that his prior unscheduled back disability resulted in an actual loss of earning capacity which, considered with his Arizona knee injury, converted that otherwise scheduled disability into one which was unscheduled.

In awarding unscheduled permanent, partial disability benefits, the Administrative Law Judge (ALJ) accorded the New Jersey judgment res judicata effect under the Full Faith and Credit Clause of the United States Constitution. Furthermore, he found that the claimant successfully proved a loss of earning capacity as a result of his New Jersey back injury.

The ALJ first found that the claimant had failed to show that the prior New Jersey industrial injury had resulted in a loss of earning capacity at the time of the Arizona knee injury. Upon claimant's request for review, however, the ALJ modified his previous determination and found that the claimant had shown a loss of earning capacity as a result of the prior New Jersey injury.

The Court of Appeals set the award aside holding that the Full Faith and Credit Clause did not apply and that the New Jersey judgment was not "any evidence of pre-existing impairment." The court further stated:

We do not reach the issue of whether the evidence supports the judge's finding that, due to the pre-existing condition, the claimant suffered a loss of earning capacity at the time of the subsequent injury.

697 P.2d at 1105.

We granted claimant's petition for review of the decision and opinion of the Court of Appeals.

Before addressing the specific issues presented, an overview of the applicable workmen's compensation statutes and cases may be helpful. A.R.S. § 23-1044(B) enumerates several injuries and sets forth a schedule for calculating the duration and amount of disability payments applicable to each. As to injuries not enumerated, such as the claimant's New Jersey back injury, subsection C provides that compensation shall be unscheduled and based upon loss of earning capacity attributable to the disability. In no event, however, shall compensation extend beyond the termination of the disability.

In the event of multiple injuries, contemporaneous or not, compensation often cannot be fixed in an arithmetic manner. Such injuries may result in a total disability more severe than the sum of the individual disabilities. See Ossic v. Verde Central Mines, 46 Ariz. 176, 188, 49 P.2d 396, 401 (1935); 2 A. Larson, Workmen's Compensation Law § 59.00 (1983). The existence of a prior disability may, therefore, cause an otherwise scheduled subsequent disability award to be converted into one which is unscheduled. Ronquillo v. Industrial Commission, 107 Ariz. 542, 490 P.2d 423 (1971). The claimant must, however, prove at the time of the second injury a loss of earning capacity as a result of the prior disability. Presumptions may aid the claimant in proving the requisite loss of earning capacity:

We hold that where there is a prior scheduled industrially related injury, the Commission may not ignore the previous injury when the workman suffers a second industrial injury. * * * In the case of a prior non-industrially related injury which would have been a scheduled award had it been industrially related, there is a presumption that the prior injury had an effect on the earning capacity of the workman at the time of the second injury although this presumption can be overcome * * *.

Id. at 544, 490 P.2d at 425. Although no such presumption of lost earning capacity applies to a prior unscheduled disability, Borsh v. Industrial Commission, 127 Ariz. 303, 305, 620 P.2d 218, 220 (1980), a subsequent scheduled disability may, nevertheless, be converted if the claimant proves an actual loss of earning capacity at the time of the second injury as a result of the prior injury. See Yanez v. Industrial Commission, 21 Ariz.App. 367, 519 P.2d 220 (1974).

EFFECT OF THE NEW JERSEY JUDGMENT

The claimant argues that the ALJ correctly accorded res judicata effect to the New Jersey disability judgment through the Full Faith and Credit Clause. We do not agree.

The Full Faith and Credit Clause of the United States Constitution provides in pertinent part: "Full Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State." U.S. Const. art. IV, § 1. The purpose and effect of this clause is to nationalize the doctrine of res judicata. Durfee v. Duke, 375 U.S. 106, 109, 84 S.Ct. 242, 244, 11 L.Ed.2d 186, 190 (1963). This policy is effectuated when states recognize a sister state's final judgments as binding and conclusive. Id. Although the Court of Appeals correctly noted that the issue in this case is really one of collateral estoppel, the Full Faith and Credit Clause also encompasses that doctrine. Braselton v. Clearfield State Bank, 606 F.2d 285, 287 (10th Cir.1979).

A recent United States Supreme Court decision has cast serious doubt on the applicability of the Full Faith and Credit Clause to workmen's compensation and other administrative determinations. In discussing the Full Faith and Credit Clause, the Court stated: "the critical differences between a court of general jurisdiction and an administrative agency with limited statutory authority forecloses the conclusion that constitutional rules applicable to court judgments are necessarily applicable to workmen's compensation awards." Thomas v. Washington Gas Light Co., 448 U.S. 261, 281-82, 100 S.Ct. 2647, 2661, 65 L.Ed.2d 757, 773 (1980). This result has, however, been sharply criticized. See Sterk, Full Faith and Credit, More or Less, to Judgments: Doubts About Thomas v. Washington Gas Light Co., 69 Geo.L.J. 1329, 1351-60 (1981).

A stronger reason for not applying the Full Faith and Credit Clause lies in the fact that the parties are not the same in Arizona as they were in New Jersey. Although the doctrine of collateral estoppel precludes parties and their privies from relitigating issues, it is axiomatic that a stranger to a litigation may not be bound by a determination made therein for purposes of subsequent litigation. Blonder-Tongue Laboratories, Inc. v. University of Illinois Foundation, 402 U.S. 313, 329, 91 S.Ct. 1434, 1443, 28 L.Ed.2d 788, 800 (1971). This rule is premised upon preventing the inherent unfairness of binding a party to an issue determination he had no opportunity to contest. Id. The rule applies in compensation-related applications of the doctrine. 3 A. Larson, supra, § 79.72(e). Thus, the Full Faith and Credit Clause may not be used to bind a litigant to a prior determination to which he was a stranger. See Depper v. Depper, 9 Ariz.App. 245, 248, 451 P.2d 325, 328 (1969); Ayers Asphalt Paving, Inc. v. Allen Rose Cement and Const. Co., 109 Ill.App.3d 520, 523, 440 N.E.2d 907, 909 (1982).

In a case similar to that before us, an applicant for federal "black lung" benefits attempted to use a state industrial commission determination to conclusively prove a disability. The Fourth Circuit Court of Appeals rejected the contention that collateral estoppel, through the Full Faith and Credit Clause, conclusively established a disability:

Third and finally, claimant contends that the Secretary refused to give Full Faith and Credit to the finding of the Industrial Commission of Virginia (the "commission") that claimant suffered from pneumoconiosis. Whether or not the Secretary is bound by the decision of the commission involves much more than the bare assertion that the Full Faith and Credit clause applies, for the...

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