Jarrard v. Cdi Telecommunications, Inc.

• Decision Date: 25 May 2005
• Docket Number: No. 04-1992.,04-1992.
• Citation: 408 F.3d 905
• Parties: Gilbert JARRARD, Plaintiff-Appellant, v. CDI TELECOMMUNICATIONS, INC. and Crawford & Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 905

408 F.3d 905

Gilbert JARRARD, Plaintiff-Appellant, v. CDI TELECOMMUNICATIONS, INC. and Crawford & Company, Defendants-Appellees.

No. 04-1992.

United States Court of Appeals, Seventh Circuit.

Argued October 28, 2004.

Decided May 25, 2005.

COPYRIGHT MATERIAL OMITTED

James E. Ayers (argued), Wernle, Ristine & Ayers, Linden, IN, for Plaintiff-Appellant.

Martin W. Kus (argued), Newby, Lewis, Kaminski & Jones, LaPorte, IN, Michael J. Rappa (argued), Johnson & Rappa, Merrillville, IN, for Defendants-Appellees.

Before POSNER, KANNE, and ROVNER, Circuit Judges.

KANNE, Circuit Judge.

Gilbert Jarrard filed a diversity suit in district court, alleging wrongdoing by his former employer, CDI Telecommunications, Inc. ("CDI"), and its third-party worker's compensation claims administrator, Crawford & Company ("Crawford"). The district court dismissed Jarrard's complaint for failure to state a claim, and Jarrard appeals. We affirm.

I. Background

On October 20, 1992, Gilbert Jarrard fell from a communications pole while on the job, suffering a crushed ankle and injuries to his shoulders, lower extremities, and back.

Jarrard underwent treatment for some of his injuries, but not the additional work-hardening and therapy that Jarrard claims were necessary to treat his remaining injuries. Unfortunately, persons employed by CDI and Crawford disagreed that Jarrard needed the additional treatment and therapy. Worse, from Jarrard's standpoint, these persons persuaded Jarrard's physician (who had been treating Jarrard's ankle and back injuries, and who had initially prescribed a work-hardening program), to issue a determination of "maximum medical improvement." According to Jarrard, this determination prematurely terminated his worker's compensation benefits, causing him to lose medical and temporary disability benefits that were to fund the treatment of his shoulder injuries until such time that he could return to work.

In October 1993, Jarrard requested an independent medical examination, but on Crawford's recommendation, Jarrard's request was denied. In January 1994, CDI applied to Indiana's Worker's Compensation Board ("the Board") for an adjustment of claim, seeking to impose on Jarrard an unfavorable permanent partial impairment rating and to foreclose additional medical and disability income benefits. A month later, CDI refused Jarrard's request for a physician to provide treatment for his shoulder injuries, and, in October 1994, Jarrard filed his own application for adjustment of claim with the Board.

Years later, on April 5, 1998, Jarrard filed a third-party complaint with the Board alleging that the defendants had acted in bad faith and committed other torts when they sought an adjustment of his compensation claim. Jarrard filed his complaint with the Board pursuant to the relevant statutory provision, which, as of July 1, 1997, grants the Board exclusive jurisdiction over bad faith and other independent tort claims relating to adjustment of worker's compensation claims. Ind. Code § 22-3-4-12.1 ("the statute").¹

The defendants filed a motion to dismiss, arguing that the Indiana legislature did not indicate that the statute was to be applied retroactively—the Board therefore did not have jurisdiction because the acts Jarrard complained of took place prior to the statute's effective date. In other words, because the Board's jurisdiction did not apply retroactively, Jarrard needed to vindicate his rights in state court, not before the Board. On February 10, 1999, the Board agreed and issued an order dismissing Jarrard's third-party claim on the basis that it did not have jurisdiction to hear his third-party complaint.² A final award in Jarrard's worker's compensation claim was entered on May 4, 2001. Jarrard never appealed the Board's dismissal of his third-party claim, nor did he file suit in state court.

In February 2003, Jarrard filed a complaint in federal court on the basis of diversity jurisdiction, alleging that he suffered damages as a result of the "gross negligence" of CDI and Crawford in adjusting his claim. The defendants again moved to dismiss Jarrard's complaint, but this time the defendants argued a position opposite to the one taken before the Board: that the Board has exclusive jurisdiction, not the courts. In support of this position, the defendants cited Indiana caselaw—decided in the period after the Board dismissed Jarrard's first complaint—holding that the statute applies retroactively, so the Board was the exclusive forum for Jarrard's new complaint. The district court in essence³ agreed with the defendants' position and dismissed Jarrard's complaint for failure to state a claim upon which relief could be granted. Fed. R.Civ.P. 12(b)(6).

II. Discussion

On appeal, Jarrard argues that the district court improperly dismissed his case. As Jarrard sees it, the district court did have jurisdiction to hear his case because, under Indiana law, the Board's entry of award accepting the defendants' interpretation of the statute was "final and conclusive." In other words, the district court was bound to accept the Board's determination that it had no retroactive jurisdiction. In any event, Jarrard argues that the defendants should not have been able to argue inconsistent positions before the Board and the district court. Jarrard asserts that it would be "unconscionable" to allow defendants to prevail on the basis of the inconsistent arguments, and that various preclusion and estoppel doctrines block the defendants from taking a position directly opposite to the position they took before the Board.

Because the district court dismissed Jarrard's complaint pursuant to Fed.R.Civ.P. 12(b)(6), our review in this case is de novo. See Cole v. U.S. Capital, 389 F.3d 719, 724 (7th Cir.2004). Before turning to the merits, however, some expansion on the applicable law and key facts is in order. As indicated earlier, the relevant Indiana statute, which was effective as of July 1, 1997, grants exclusive jurisdiction to the Board to determine whether a worker's compensation insurance carrier acted in bad faith or committed other torts in adjusting or settling the aggrieved worker's claim. Ind.Code § 22-3-4-12.1(a); see also Sims v. United States Fid. & Guar. Co., 782 N.E.2d 345, 352 (Ind.2003) (holding statute constitutional). As of the time Jarrard filed his third-party claim before the Board, the Indiana courts had not spoken regarding the statute's retroactivity.

Within months of the Board's dismissal of Jarrard's third-party claim, however, two Indiana Court of Appeals cases held that the statute in fact could be applied retroactively. See Samm v. Great Dane Trailers, 715 N.E.2d 420 (Ind.Ct. App.1999); Borgman v. State Farm Ins. Co., 713 N.E.2d 851 (Ind.Ct.App.1999); see also Goetzke, 280 F.3d at 779-80 (analyzing changes in Indiana law wrought by the statute and Samm). In Borgman, the plaintiffs (like Jarrard) filed suit in Indiana court after the effective date of the statute alleging tortious acts that took place before that date. Borgman, 713 N.E.2d at 853. The court dismissed the case, concluding that the statute applied retroactively, and thus the Board was the proper forum for the plaintiffs' suit. See id. at 853-54. The Indiana Court of Appeals held that the plaintiffs' complaint rested within the exclusive jurisdiction of the Board even though the acts complained of took place before the statute's effective date, and thus dismissal for lack of subject matter jurisdiction was appropriate. See id. at 855. Likewise, in Samm, the court reaffirmed Borgman's holding that the statute can be applied retroactively to acts taking place before the statute's effective date. See Samm, 715 N.E.2d at 423-24.

In short, Indiana law required that Jarrard bring his claims before the Board, not the courts. Although this interpretation of the statute was not clearly established in Indiana law as of the time Jarrard brought his action before the Board in 1998, the interpretation was controlling as of the time he filed suit in federal district court in 2003. The defendants won a dismissal from the Board based on a colorable interpretation of the statute at the time, and then, years later, won another dismissal in federal court based on the recently decided Indiana caselaw refuting the defendants' proposed interpretation.

Unfortunately, somewhere along the way, Jarrard slipped through the cracks and has not been able to have his case heard on the merits before any tribunal. Jarrard first filed his claim with the Board, only to be told that he should have filed his claim in state court. When he later sought to vindicate his rights in federal court, he discovered that, as a result of Indiana caselaw decided in the interim, the proper forum for his claim was the Board after all. It is therefore easy to characterize Jarrard as being trapped in a sort of legal limbo over which he had no control—a "trick box," as the district court aptly described it.

This characterization does not tell the entire story, however. Jarrard was not without recourse when the Board dismissed his tort claims in February 1999. Jarrard need not have uncomplainingly accepted the defendants' and the Board's conclusions with respect to whether the statute applied retroactively. As Jarrard concedes, he could have appealed the Board's decision to the full Board in accordance with procedures set forth in Indiana law. Ind.Code 22-3-4-8. He would have had to file such an appeal by March 2, 1999, but Jarrard opted not to do so. Or Jarrard could have filed suit in court in response to the Board's determination that it did not have jurisdiction to hear his case. Indeed, had Jarrard expeditiously appealed the Board's decision or sought relief in state court, it is likely that the Borgman opinion (decided June 9, 1999) would have issued during the course of his appeal or state court litigation, perhaps settling the retroactivity question in Jarrard's...