Larsen v. Sioux Falls School Dist. No. 49-5

• Decision Date: 22 December 1993
• Docket Number: No. 18007,18007
• Citation: 509 N.W.2d 703
• Parties: Robert D. LARSEN, Claimant and Appellee, v. SIOUX FALLS SCHOOL DISTRICT # 49-5, Employer and Appellant, and Rockwood Insurance Company, Insurer and Appellant.
• Court: South Dakota Supreme Court

Page 703

509 N.W.2d 703

Robert D. LARSEN, Claimant and Appellee, v. SIOUX FALLS SCHOOL DISTRICT # 49-5, Employer and Appellant, and Rockwood Insurance Company, Insurer and Appellant.

No. 18007.

Supreme Court of South Dakota.

Argued Feb. 9, 1993.

Reassigned April 8, 1993.

Decided Dec. 22, 1993.

Michael Hanlon, Sioux Falls, for claimant and appellee.

J.G. Shultz and James E. Moore of Woods, Fuller, Shultz and Smith, Sioux Falls, for appellants.

JOHNS, Circuit Judge (on reassignment).

This is a joint appeal by employer, Sioux Falls School District 49-5 (District), and its worker's compensation carrier, Rockwood Insurance Company (Rockwood), from a judgment of circuit court wherein the Honorable Steven L. Zinter reversed a summary judgment entered by the South Dakota Department of Labor, Division of Labor and Management (Department), in favor of District and Rockwood and against District's former employee, Robert D. Larsen (Larsen). The circuit court remanded the matter to Department for further proceedings. We reverse and remand.

FACTS

Larsen was employed by District as a custodian when he suffered on-the-job injuries to his back in the years 1985, 1986, and 1987. Sometime in 1987 District adopted a requirement that custodians be able to lift a minimum of 100 pounds. While Larsen's treating physician released him for work in January 1988, Larsen was released with a 30 pound lifting restriction. Because this weight restriction was considered to be permanent in nature, District terminated Larsen's employment in October 1988.

In January 1989, Larsen's doctor assigned him, on the basis of the 1987 injury, a permanent partial impairment rating of 20% to the whole man. Rockwood then wrote to Larsen that the 20% rating would entitle him to $14,054.98 in permanent partial disability benefits. Rockwood also enclosed Department Form 111 and instructed Larsen that if he wanted the permanent partial disability benefits, he should sign the form so that it could be filed with Department. Larsen signed the form on February 7, 1989, and it was approved by Department on March 29, 1989.

On October 20, 1989, Larsen filed a petition with Department in which he sought permanent total disability benefits for the same back injury. The petition did not allege that Larsen's physical condition had changed since the time he signed Form 111, nor has Larsen made any such contention throughout these proceedings.

On April 4, 1990, this Court decided Whitney v. AGSCO Dakota, 453 N.W.2d 847 (S.D.1990). We recognized that a settlement agreement of an employee and employer may have the effect of a final determination of all matters embraced therein and as such would be conclusive of those matters in later proceedings involving the same parties. On May 1, 1991, District and Rockwood filed a motion for summary judgment based on Whitney. They argued that the Form 111 agreement signed by Larsen, like the agreement in Whitney, precluded him from recovering any additional benefits without a showing that his physical condition had changed. In response, Larsen argued that Whitney should not be retroactively applied. The Department rejected Larsen's arguments and found that Whitney was controlling in that it followed past precedents of this court and did not announce any new principles of law. Deputy Director James Marsh, in his written decision granting summary judgment, went on to state that where a settlement agreement does not contain an express reservation of continuing jurisdiction by Department, "additional claims as to all matters that could have been contemplated in the agreement are barred by res judicata." Judge Zinter reversed and remanded concluding that Whitney should have prospective application only.

Although Judge Zinter concluded that Whitney did not apply to the case at hand, he never entered any conclusion of law that the language of the settlement agreement, in and of itself, would or would not preclude Larsen from pursuing a claim for permanent total disability. Rather, in Conclusion of Law II, he stated:

That the Form 111 herein was intended by the Appellant [Larsen], Appellees [District and Rockwood] and the South Dakota Department of Labor to be a partial or interim agreement for the payment of permanent partial disability benefits and was not intended by the parties to be a final award.

Subsequent to Larsen filing his appeal to circuit court he also filed a motion for relief, pursuant to SDCL 15-6-60(b)(1) and (6). This motion was contingent upon the circuit court finding that Form 111 had the effect of a final judgment or order. The essence of this motion was that Larsen understood at the time he entered the settlement agreement that it was for permanent partial disability compensation only and that by signing it he was not waiving or otherwise releasing his right to any other benefits under the worker's compensation statutes. In Conclusion of Law XI, Judge Zinter determined that it was not necessary to decide this motion given his remand to Department.

ISSUES

1. Should Whitney's holding on the question of the res judicata effect of worker's compensation settlement agreements have a prospective application only? We answer in the negative.

2. Because of the settlement agreement in the instant case, is Larsen barred by the doctrine of res judicata from litigating his claim for permanent total disability? We answer in the affirmative.

ANALYSIS

The parties to this appeal have spent most of their energies arguing whether our decision in Whitney, supra, should have prospective application only. In Matter of K.O. Lee Co., 489 N.W.2d 606, 610 (S.D.1992) this Court held that prospective application of a given decision "is entirely a question of law and, therefore, freely reviewable." Id. citing Karras v. State, Dept. of Revenue, 441 N.W.2d 678, 679 (S.D.1989). In making this determination we have established three factors for our consideration:

(1) the decision to be applied prospectively must establish a new principle of law by either, overruling clear past precedent on which litigants have relied, or, by deciding an issue of first impression whose resolution was not clearly foreseen; (2) the court must weigh the merits and demerits of each case by looking to the prior history of the rule in question, its purpose and effect, and whether retrospective operation will further retard its operation; and (3) the court must determine whether the decision would produce substantial inequitable results if applied retroactively.

First Nat'l Bank v. Meyer, 476 N.W.2d 267, 271 (S.D.1991) citing Chevron Oil Co. v. Huson, 404 U.S. 97, 106-07, 92 S.Ct. 349, 355-56, 30 L.Ed.2d 296, 306 (1971); Fisher v. Sears, Roebuck & Company, 88 S.D. 1, 4-5, 214 N.W.2d 85, 87 (1974).

The first question we must answer is what was the holding in Whitney anent the res judicata effect of worker's compensation settlement agreements. We must then determine if its holding announced a new rule of law. If it did not, then our inquiry is ended since our analysis of the present settlement agreement will be the same whether we refer to Whitney or its precedents; for "by definition, without a new rule, there is no change in the law and the question of retroactivity is immaterial." United States v. Bowen, 500 F.2d 960, 975 (9th Cir.1974).

In Whitney, the employee entered into an agreement (which contained at least two provisions identical to those found in Form 111 signed by Larsen in this case) for permanent partial disability benefits based on an April, 1984 back injury. After the settlement he was diagnosed as having silicosis. It was only after this diagnosis that he made a claim that he was permanently and totally disabled because of his back injury and the silicosis. On appeal, he contended that Department had continuing jurisdiction to consider his claim for total permanent disability since this issue was not addressed in the stipulation and order. Upon our review of the stipulation and order we found that it did not contain any provision reserving continuing jurisdiction over issues not addressed and that, more specifically, it did not contain any expressed reservation over the issue of permanent total disability. We went on to quote the trial court with approval, saying:

The language in the Stipulation and approval did not lack finality. On the contrary, the Stipulation clearly permitted increased benefits only if Whitney's percent disability increased or if he required further medical treatment as a result of this working injury.

Whitney, 453 N.W.2d at 850. We then concluded that since the award did not contain language which left open a pending issue, all matters considered in the stipulation (including the nature and extent of disability) were res judicata. From this we held that because Whitney's alleged permanent total disability was due, in part, to the silicosis diagnosis and was not due to any aggravation of his 1984 injury, the language of the stipulation approved by the Department constituted a final determination of his claim and that, therefore, he was precluded from seeking further relief.

The holding in Whitney was decided on well settled law of this state that worker's compensation awards, whether by agreement of the parties ¹ or following an adjudication, are res judicata as to all matters considered unless the department has reserved continuing jurisdiction over one or more questions. Call v. Ben. & Protec. Order of Elks, 307 N.W.2d 138 (S.D.1981); Stowsand v. Jack Rabbit Lines, 75 S.D. 11, 58 N.W.2d 298 (1953); Salmon v. Denhart Elev., 72 S.D. 110, 30 N.W.2d 644 (1948); Chittenden v. Jarvis, 68 S.D. 5, 297 N.W. 787 (1941); Bailey v. Hess, 55 S.D. 602, 227 N.W. 69 (1929). A statutory exception to the finality rule is found in SDCL 62-7-33 ² which gives the Department continuing jurisdiction to adjust payments when there is a physical change in the employee's condition from that of the last award. Whitney, 453 N.W.2d at 850-52 c...