Hayes v. Rosenbaum Signs & Outdoor Advertising, Inc.

• Decision Date: 27 August 2014
• Docket Number: No. 26875.,26875.
• Citation: 853 N.W.2d 878
• Court: South Dakota Supreme Court
• Parties: Kevin HAYES, Appellant, v. ROSENBAUM SIGNS & OUTDOOR ADVERTISING, INC. and Acuity, Appellees.

853 N.W.2d 878

Kevin HAYES, Appellant

v.ROSENBAUM SIGNS & OUTDOOR ADVERTISING, INC. and Acuity, Appellees.

No. 26875.

Supreme Court of South Dakota.

Considered on Briefs on April 28, 2014.

Decided Aug. 27, 2014.

Michael J. Simpson, Julius & Simpson, LLP, Rapid City, South Dakota, Attorneys for appellant.

Charles A. Larson, Boyce, Greenfield, Pashby & Welk, LLP, Sioux Falls, South Dakota, Attorneys for appellees.

Opinion

SEVERSON, Justice.

[¶ 1.] Kevin Hayes appeals the Seventh Judicial Circuit Court's affirmance of a Department of Labor's (Department's) workers' compensation determination. We reverse and remand.

Background

[¶ 2.] Hayes injured his lower back on March 27, 2007, while working for Rosenbaum Signs. Rosenbaum and its insurer Acuity (collectively “Employer”) treated the claim as compensable and paid for medical treatment. Employer then required that Hayes see Dr. Dale Anderson for an independent medical evaluation (IME) on October 4, 2007. Based on Dr. Anderson's evaluation, Employer denied further medical treatment.

[¶ 3.] Hayes filed a petition for hearing on May 13, 2009, alleging entitlement to medical benefits from Employer. Employer answered denying that Hayes' work injury remained a major contributing cause to his current need for medical treatment. Hayes submitted an affidavit from his treating physician, Dr. Christopher Dietrich, who stated that the 2007 injury was a major contributing cause of his current condition and need for ongoing medical treatment. Dr. Anderson was deposed on March 30, 2010. Dr. Anderson testified that Hayes had reached maximum medical improvement and that Hayes' low back condition and need for treatment was fifty percent caused by his pre-existing low back fusion in 1991 and fifty percent by the 2007 injury. After Dr. Anderson's deposition, Employer filed an amended answer dated July 30, 2010, (amended answer) where it admitted that “Claimant's work activities are currently a major contributing cause to his current need for medical treatment or low back pain.” The Department, on August 3, 2010, dismissed the case without prejudice (order of dismissal), stating:

The Employer and Insurer, having filed an Amended Answer, and having admitted items in controversy as set out in the Petition, and the parties having agreed that controversy or dispute no longer exists in this matter, at this time, IT IS HEREBY: ORDERED that the above-captioned matter be dismissed without prejudice.

[¶ 4.] On May 2, 2011, Employer required that Hayes see Dr. Nolan Segal for an IME. Dr. Segal agreed that Hayes suffered an initial work injury, but testified that the work injury was no longer a major contributing cause of Hayes' current condition. Instead, Dr. Segal concluded that Hayes' ongoing back problems were due to a longstanding chronic condition dating back to the late 1980s. Dr. Segal based his opinion primarily on records for the period before November 2007, which Dr. Anderson previously considered, and which led to Employer's admission. Employer denied further medical treatment based upon Dr. Segal's IME. Hayes petitioned for a hearing.

[¶ 5.] On April 17, 2013, the Department held a hearing to address Hayes' petition. Hayes argued that res judicata applied to prevent Employer from changing its position from its previous admittance. Hayes further argued, based on Dr. Dietrich's opinion by deposition submitted at the hearing, that the 2007 injury is and remains a major contributing cause of his current condition and need for medical treatment. Employer argued that it is not changing positions, but that Hayes' 2010 physical condition was different than his current condition, and that Hayes' work injury no longer remains a major contributing cause of his current condition. Employer further argued that res judicata does not apply to this case. The Department agreed with Employer and found res judicata inapplicable and that Hayes failed to meet his burden of proof on causation. The circuit court affirmed the Department on October 25, 2013.

[¶ 6.] Hayes appeals, raising as issues (1) Whether res judicata or other equitable principles such as judicial estoppel preclude Employer's argument, and (2) Whether Hayes proved that the 2007 injury is and remains a major contributing cause of his current condition.

Standard of Review

[¶ 7.] SDCL 1–26–37 governs the standard of review, stating in part that this Court “shall give the same deference to the findings of fact, conclusions of law, and final judgment of the circuit court as it does to other appeals from the circuit court.” “When an issue is a question of fact, then the clearly erroneous standard applies to the agency's findings.” Vollmer v. Wal–Mart Store, Inc., 2007 S.D. 25, ¶ 12, 729 N.W.2d 377, 382. “We will reverse only when we are firmly convinced a mistake has been made.” Id. However, “[w]hen an agency makes factual determinations on the basis of documentary evidence, such as depositions, the matter is reviewed de novo.” Id. “Agency decisions concerning questions of law ... are fully reviewable.” Grauel v. S.D. Sch. of Mines & Tech., 2000 S.D. 145, ¶ 7, 619 N.W.2d 260, 262.

Analysis

[¶ 8.] (1) Whether res judicata or other equitable principles such as judicial estoppel preclude insurer's argument.

[¶ 9.] Ultimately, this issue rests on the legal effect of the amended answer and order of dismissal. Hayes claims that Employer's admission resolves in his favor a compensable injury under SDCL 62–1–1(7) and subsequent challenges are barred by res judicata or judicial estoppel. Employer contends res judicata is irrelevant because its argument relates to whether Hayes' work injury remains a contributing cause of his complained current condition. In the alternative, Employer argues that Hayes cannot satisfy res judicata's or judicial estoppel's elements.

[¶ 10.] “Res judicata consists of two preclusion concepts: issue preclusion and claim preclusion.” Link v. L.S.I., Inc., 2010 S.D. 103, ¶ 34, 793 N.W.2d 44, 54 (quoting Am. Family Ins. Grp. v. Robnik, 2010 S.D. 69, ¶ 15, 787 N.W.2d 768, 774 ). Issue preclusion, also known as collateral estoppel, “bars ‘a point [that] was actually and directly in issue in a former action and was judicially passed upon and determined by a domestic court of competent jurisdiction.’ ” Id. ¶ 36 (alteration in original) (quoting Robnik, 2010 S.D. 69, ¶ 18, 787 N.W.2d at 775 ). “Claim preclusion bars not only relitigation of issues previously heard and resolved, but also claims that could have been raised in the earlier proceeding, even though not actually raised.” Nemec v. Goeman, 2012 S.D. 14, ¶ 16, 810 N.W.2d 443, 447 (citing Link, 2010 S.D. 103, ¶ 38, 793 N.W.2d at 55 ). See Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 77 n. 1, 104 S.Ct. 892, 894 n. 1, 79 L.Ed.2d 56 (1984) (explaining res judicata's nuances).

[¶ 11.] Here, whether res judicata applies requires a determination of the legal effect of the circuit court's August 3, 2010 order of dismissal. Critical to this inquiry is that the order of dismissal was without prejudice. The phrase “without prejudice” ordinarily imports contemplation of further proceedings and the only adjudication by such judgment is that nothing is adjudged. Subsequently, the parties are free to litigate as though the action never commenced. As such, an order to dismiss without prejudice does not constitute res judicata. Satsky v. Paramount Comm., Inc., 7 F.3d 1464, 1468 (10th Cir.1993) (citing Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 396, 110 S.Ct. 2447, 2456, 110 L.Ed.2d 359 (1990) ); Smallwood v. City & Cnty. of Honolulu, 118 Hawai‘i 139, 185 P.3d 887, 901 (App.2008) (citation omitted). See generally 50 C.J.S Judgments § 1051 (2014) (“A judgment dismissing an action ‘without prejudice’ does not constitute either res judicata or collateral estoppel.”). Res judicata, therefore, does not apply to the August 3, 2010 order of dismissal.

[¶ 12.] In the alternative, Hayes argues that judicial estoppel prevents Employer from “changing course” and arguing that Hayes' current condition is not attributable to his work injury. Employer argues that Hayes inappropriately raised this issue for the first time on appeal and in the alternative that Hayes cannot satisfy judicial estoppel's elements.

[¶ 13.] Upon review of the record, we note that Hayes did raise judicial admissions and estoppel, along with res judicata, in his pleadings. Further, judicial estoppel is unique in that “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.” Winnebago Indus., Inc. v. Haverly, 727 N.W.2d 567, 573 (Iowa 2006) (citing In re Cassidy, 892 F.2d 637, 641 (7th Cir.1990) ; State v. Duncan, 710 N.W.2d 34, 43–44 (Iowa 2006) ). Thus, we address Hayes' argument.

[¶ 14.] “The gravamen of judicial estoppel is not privity, reliance, or prejudice. Rather it is the intentional assertion of an inconsistent position that perverts the judicial machinery.”

Canyon Lake Park, LLC v. Loftus Dental, P.C., 2005 S.D. 82, ¶ 34, 700 N.W.2d 729, 738 (quoting Rand G. Boyers, Comment, Precluding Inconsistent Statements: The Doctrine of Judicial Estoppel, 80 Nw. U.L. Rev 1244, 1249 (1986) ). Because judicial machinery takes many forms, judicial estoppel applies to judicial as well as quasi-judicial proceedings. See Winnebago, 727 N.W.2d at 573–74 ; Rissetto v. Plumbers & Steamfitters Local 343, 94 F.3d 597, 604 (9th Cir.1996) ; Simon v. Safelite Glass Corp., 128 F.3d 68, 72 (2d Cir.1997) ( “Ascertaining the truth is as important in an administrative inquiry as in judicial proceedings.”).

[¶ 15.] We generally consider the following elements when deciding whether to apply judicial estoppel: “the later position must be clearly inconsistent with the earlier one; the earlier position was judicially accepted, creating the risk of inconsistent legal determinations; and the...