Paschke v. Retool Industries

Decision Date05 July 1994
Docket NumberNo. 6,J,Docket No. 96276,6
Citation519 N.W.2d 441,445 Mich. 502
PartiesRaymond R. PASCHKE, Plaintiff-Appellant, v. RETOOL INDUSTRIES and Michigan Mutual Insurance Company, Defendants-Appellees. Calendaran. Term--1994.
CourtMichigan Supreme Court

MALLETT, Justice.

This worker's compensation case comes to us following a reversal of an award by the Court of Appeals. The Court of Appeals found that plaintiff was judicially estopped from asserting his claim of total disability by previous assertions made to the Employment Security Commission that he was willing and able to work.

We reverse the decision of the Court of Appeals and find that plaintiff was not judicially estopped from advancing his claim. A representation made before the MESC that one is willing and able to work, in order to secure unemployment benefits, may not be used to preclude a subsequent claim that one was totally disabled during that same period.


There being no showing of fraud, we take the factual findings of the Worker's Compensation Appeal Board as conclusive. Const. 1963, art. 6, § 28, M.C.L. § 418.861; M.S.A. § 17.237(861).

Plaintiff Raymond R. Paschke was employed by defendant Retool Industries from 1956 until 1983. During that twenty-seven year span, Mr. Paschke worked in the capacity of office manager. As office manager, he was in charge of funding, client development, payroll, and similar matters. He testified that he spent the majority of his time in customer relations.

In 1981, the owner of Retool Industries sold his interest to Herman Wilson, previously the company foreman. Within less than a month after taking over the business, Mr. Wilson discharged assistant office manager Nelson Nettie, despite admitted discussions before the takeover that he would keep on both Mr. Nettie and plaintiff. While Mr. Wilson testified that he had discharged Mr. Nettie for stealing from the company, he also stated that he had been aware of that stealing before his promise to keep him on. Mr. Nettie denied that he was discharged for stealing. After terminating Mr. Nettie, Mr. Wilson replaced him as assistant office manager with Carolyn Wilkerson, Mr. Wilson's live-in girl friend.

After the first year of Mr. Wilson's ownership, in late 1982 and early 1983, plaintiff began to experience physical problems such as inability to sleep, chest pains, and headaches. He attributed these ailments to troubling conditions at work. Specifically, he felt that Ms. Wilkerson was given preferential treatment in the form of a relaxed workday schedule and pay increases, while he and other employees received no increased benefits, but actually had their vacation pay benefits cut. Further, he had seen Mr. Nettie discharged, despite Mr. Wilson's promise to keep him on, and plaintiff feared that he might be next to go. He also testified that he felt anxiety regarding his dealings with creditors, who had loaned funds to the company largely on the basis of their past dealings with and trust of him. The company was increasingly unable to satisfy those debts because of financial difficulties, and plaintiff felt that he could not deal honestly with those creditors, because Mr. Wilson refused to discuss workplace finances with him and also refused to deal with the creditors himself.

On March 22, 1983, plaintiff stayed home from work, on the advice of his wife, and sought medical treatment from their family doctor, Robert Tam. Dr. Tam prescribed anti-depressants and blood pressure and water pills. He also recommended that plaintiff not return to work.

By June, 1983, plaintiff had begun to feel better, and he contacted Mr. Wilson about resuming his former position as office manager. By registered letter, Mr. Wilson informed plaintiff that he could return to work, but not in his former position. Instead, he offered plaintiff the assistant office manager position, in which plaintiff would serve as subordinate to his former underling, Ms. Wilkerson, at a corresponding cut in pay. The letter acknowledged that plaintiff's "hypertension and nerves" might be related to work and stated that the board felt a lessening of responsibility might alleviate plaintiff's ailments.

Plaintiff testified that he was "[s]hocked" by this response, that it caused his physical condition to worsen, and that he rejected the offer of reemployment. For the next six months, he received company health and accident benefits. In August, 1983, plaintiff petitioned for worker's compensation benefits, alleging total disability, and soon thereafter relocated to Florida, where he and his wife purchased a home. In November, 1983, he sought and obtained unemployment compensation, over Mr. Wilson's objection. 1

At the worker's compensation hearing before a hearing referee, plaintiff testified, without objection, to the fact that he had previously received unemployment compensation and that, in order to receive that benefit, he had represented to the MESC that he was ready and able to return to work at some place other than Retool Industries. He also testified that he had unsuccessfully sought work since leaving Retool. His wife testified that he had sent out twenty-five to thirty resumes, primarily in Florida.

The referee found that plaintiff had failed to establish any disability arising out of the course of employment. The ruling was reversed by the WCAB. By order dated June 29, 1990, the WCAB awarded plaintiff total disability benefits on the basis of his hypertension and psychiatric claims.

Defendants appealed in the Court of Appeals, which found, sua sponte, that plaintiff's worker's compensation claim was barred by the doctrine of judicial estoppel. 197 Mich.App. 650, 496 N.W.2d 804 (1992). The Court held that plaintiff's claim was inconsistent with claims earlier made to the MESC that he was willing and able to work. 2 Following a petition for rehearing, the Court of Appeals clarified its brief holding in the case. 198 Mich.App. 702, 499 N.W.2d 453 (1993). While maintaining that plaintiff was judicially estopped from asserting his worker's compensation claim, the Court limited its decision to the facts of plaintiff's case, i.e., a claim for total disability. The Court explained that under the doctrine of judicial estoppel only "wholly inconsistent" claims are prohibited, and that the receipt of unemployment benefits would not preclude a claim of partial disability for the same period. Id. at 709, 499 N.W.2d 453. Dual recovery might also be allowed if claimant's disability consisted of a latent condition that was not discovered until after claimant had sought and received unemployment benefits.

This Court granted leave to appeal. 444 Mich. 866 (1993). We reverse.


The doctrine of judicial estoppel first emerged in the mid 1800s, in a Tennessee case, Hamilton v. Zimmerman, 37 Tenn. (5 Sneed) 39 (1857). Comment, Judicial estoppel--Beating shields into swords and back again, 139 U.Pa.L.R. 1711, 1719 (1991). In Hamilton, the court determined that the plaintiff was estopped from maintaining a position inconsistent with one he had asserted under oath in an earlier judicial proceeding. Sometimes described as the doctrine against the assertion of inconsistent positions, id. at 1711, judicial estoppel is widely viewed as a tool to be used by the courts in impeding those litigants who would otherwise play "fast and loose" with the legal system. Bigelow, Estoppel (6th ed.), p. 783. Since Hamilton, the doctrine has been adopted by most state and federal courts, in slightly varying forms. 3

In the context of the administrative proceedings at issue, we adopt the "prior success" model of judicial estoppel:

Under this doctrine, a party who has successfully and unequivocally asserted a position in a prior proceeding is estopped from asserting an inconsistent position in a subsequent proceeding. [Lichon v. American Univ. Ins. Co., 435 Mich. 408, 416, 459 N.W.2d 288 (1990), citing Edwards v. Aetna Life Ins. Co., 690 F.2d 595, 598 (C.A.6, 1982). (Emphasis added).]

Under the "prior success" model, the mere assertion of inconsistent positions is not sufficient to invoke estoppel; rather, there must be some indication that the court in the earlier proceeding accepted that party's position as true. 4 Further, in order for the doctrine of judicial estoppel to apply, the claims must be wholly inconsistent.

While the Court of Appeals correctly stated that only wholly inconsistent claims were precluded, we find that the panel's application of that standard to the facts in this case was clearly error. There exists neither statutory nor judicial support for the Court of Appeals determination that plaintiff's representation that he was ready and available for work, made before the MESC, was wholly inconsistent with his subsequent claim of total disability during the same period.


This Court and the lower courts of Michigan have devoted considerable time and energy to the examination of both statutes involved in this dispute: the Worker's Disability Compensation Act, M.C.L. § 418.101 et seq.; M.S.A. § 17.237(101) et seq., and the Employment Security Act, M.C.L. § 421.1 et seq.; M.S.A. § 17.501 et seq. In the course of this exploration, a number of guiding principles has emerged that might be helpful in evaluating the interrelation of the two statutes in the present case.

We have previously explained that the WDCA is in derogation of the common law, and its terms should be literally construed without judicial enhancement.


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