Squealer Feeds v. Pickering, 94-17

• Decision Date: 26 April 1995
• Docket Number: No. 94-17,94-17
• Citation: 530 N.W.2d 678
• Parties: SQUEALER FEEDS and Liberty Mutual Insurance Company, Appellants, v. Robert PICKERING and Division of Industrial Services, Appellees.
• Court: Iowa Supreme Court

Page 678

530 N.W.2d 678

SQUEALER FEEDS and Liberty Mutual Insurance Company, Appellants, v. Robert PICKERING and Division of Industrial Services, Appellees.

No. 94-17.

Supreme Court of Iowa.

April 26, 1995.

Iris J. Post and David C. Duncan of Grefe & Sidney, Des Moines, for appellants.

David D. Drake, West Des Moines, for appellee Pickering.

Thomas J. Miller, Atty. Gen., and Craig Kelinson, Sp. Asst. Atty. Gen., for appellee Div. of Industrial Services.

Considered en banc.

TERNUS, Justice.

Appellee, Robert Pickering, wants to examine the entire claim file of appellant, Liberty Mutual Insurance Company. Liberty Mutual has produced all documents prepared up to and including the date it denied Pickering's claim for workers' compensation benefits. It resists discovery of that portion of its file postdating the denial. Liberty Mutual contends that those materials are irrelevant and are protected by the work product doctrine and the attorney-client privilege. Pickering says that the file is relevant and is discoverable under Iowa Rule of Civil Procedure 125(a)(I)(C), allowing discovery of an expert's opinions and facts known to the expert, because Liberty Mutual designated its prior attorney as an expert witness.

The deputy industrial commissioner ordered Liberty Mutual to produce its entire file. The industrial commissioner rejected the insurer's request for review on the basis that the appeal was interlocutory. The district court denied judicial review for the same reason.

We conclude that the district court should have permitted Liberty Mutual to appeal the deputy's discovery order. Because we think the deputy abused his discretion in ordering the production of the entire claim file, we reverse and remand for further proceedings consistent with this opinion.

I. Background Facts and Proceedings.

Robert Pickering worked for appellant, Squealer Feeds. He injured his back and applied for workers' compensation benefits. Liberty Mutual, the workers' compensation insurer for Squealer Feeds, denied Pickering's claim.

Pickering then filed an action with the Iowa industrial commissioner, seeking workers' compensation benefits and penalty benefits. See Iowa Code §§ 86.13, .14 (1993). These claims were to be tried separately. After a hearing on the claim for compensation benefits, an agency appeal and judicial review by the district court, Squealer Feeds and Liberty Mutual were ordered to pay healing period benefits, permanent partial disability benefits and medical bills.

The parties then turned to the claim for penalty benefits. Liberty Mutual's attorney, Greg Egbers, withdrew from the case and the company's present attorneys identified Egbers as an expert witness. Pickering requested the production of Liberty Mutual's entire claim file. Liberty Mutual produced only those portions of its file that predated its denial of Pickering's claim. Pickering's motion to compel production of the remainder of the file was granted by the deputy industrial commissioner.

Liberty Mutual filed an application to appeal to the industrial commissioner and requested a stay of the deputy's order. The industrial commissioner dismissed the application, ruling that it was an impermissible interlocutory appeal. Liberty Mutual then sought judicial review and a writ of certiorari in district court. The district court affirmed the ruling of the industrial commissioner that the appeal was interlocutory and denied the request for a writ of certiorari. This appeal followed. ¹

II. Scope of Review.

Iowa Code chapter 17A, Iowa's administrative procedure act, governs our review of this case. See Iowa Code § 86.26 (1993). We review rulings of the industrial commissioner for correction of errors of law, as does the district court. Mortimer v. Fruehauf Corp., 502 N.W.2d 12, 14 (Iowa 1993). We may affirm, reverse, modify or grant any other appropriate relief, equitable or legal. Iowa Code § 17A.19(8) (1993). Relief may be granted when the agency's decision is "affected by [other] error of law" or is "characterized by an abuse of discretion or a clearly unwarranted exercise of discretion." Id. § 17A.19(8)(e), (g).

With respect to discovery rulings, an abuse of discretion occurs when the ruling rests on grounds or reasons clearly untenable or unreasonable. Shook v. City of Davenport, 497 N.W.2d 883, 885 (Iowa 1993). Additionally, if the ruling is based on an incorrect interpretation of our discovery rules, reversal is warranted. Id.

III. Availability of Judicial Review.

Both the industrial commissioner and the district court refused to address the merits of the deputy's ruling on discovery, holding that the insurer's appeal was interlocutory and therefore impermissible. Upon our review of this issue, we agree that the appeal to the commissioner and district court was interlocutory, but we think it should have been permitted by the district court. ²

Judicial review of orders of the industrial commissioner is governed by chapter 17A. Iowa Code § 86.26 (1993). Iowa Code section 17A.19(1) states in part:

A preliminary, procedural or intermediate agency action is immediately reviewable if all adequate administrative remedies have been exhausted and review of the final agency action would not provide an adequate remedy.

Under this statute, Liberty Mutual was entitled to judicial review if (1) it had exhausted all adequate administrative remedies, and (2) review of the industrial commissioner's final decision on penalty benefits would not provide an adequate remedy.

A. Exhaustion requirement. The exhaustion requirement seeks to insure an intra-agency review so that the agency will have a chance to correct its own errors. Continental Tel. Co. v. Colton, 348 N.W.2d 623, 626-27 (Iowa 1984). The agency was given that opportunity here when Liberty Mutual requested that the industrial commissioner review the deputy's order. Although the commissioner refused to address the merits of the deputy's order, his refusal does not mean that administrative remedies were not exhausted. Consequently, we conclude that Liberty Mutual exhausted its administrative remedies when it requested review by the commissioner and that request was denied. Therefore, it has met the first requirement for judicial review.

B. Adequacy of appeal from final decision. Pickering seeks to sustain the district court's ruling on the basis that Liberty Mutual has an adequate remedy that makes an interlocutory appeal unnecessary. Pickering argues that Liberty Mutual's rights can be fully protected by review of the agency's final decision awarding or denying penalty benefits. We disagree.

We have held that a litigant who can establish irreparable injury from following the normal administrative appeal process has met the requirement of showing that judicial review of final agency action is an inadequate remedy for purposes of section 17A.19(1). Iowa Indus. Comm'r v. Davis, 286 N.W.2d 658, 662 (Iowa 1979); Salsbury Labs. v. Iowa Dep't of Envtl. Quality, 276 N.W.2d 830, 837 (Iowa 1979). Here Liberty Mutual asserts it will suffer irreparable injury by divulging materials protected by the work product doctrine and the attorney-client privilege.

Although we have never considered such a claim of irreparable injury, other courts have. These courts have concluded that the production of privileged documents prior to judicial review does result in irreparable injury. Allstate Ins. Co. v. Langston, 627 So.2d 1178, 1179 (Fla.Dist.Ct.App.1993) (certiorari, only available to prevent irreparable injury, was granted to decide if materials fell within the work product or attorney-client privileges); Haynes v. Anderson, 597 So.2d 615, 620 (Miss.1992) (noting irreparable injury from production of claim file due to "the Humpty Dumpty syndrome"); Mid-American Nat'l Bank & Trust Co. v. Cincinnati Ins. Co., 74 Ohio App.3d 481, 599 N.E.2d 699, 701 (1991) (allowing appeal of discovery order because release of correspondence from party's attorney could result in irreparable injury making an appeal after judgment impractical); National Union Fire Ins. Co. v. Valdez, 863 S.W.2d 458, 462 (Tex.1993) (holding that appeal from final judgment is inadequate where trial court has ordered the production of privileged information).

We agree with these courts. Once the documents in Liberty Mutual's claim file are produced, a later ruling that they are not discoverable would be largely ineffectual. A ruling precluding the use of these documents would not erase the memory of the contents of the documents from the minds of Pickering and his attorneys. Moreover, any advantage gained from this knowledge would be impossible to eliminate. We think the injury resulting from disclosure of privileged communications and materials is irreparable.

We are normally hesitant to allow judicial review of discovery disputes in administrative proceedings prior to final agency action. Christensen v. Iowa Civil Rights Comm'n, 292 N.W.2d 429, 431 (Iowa 1980). However, under the specific facts of this case, we conclude that Liberty Mutual has met the requirements of section 17A.19(1) for judicial review of an interlocutory agency decision. ³ Therefore, the district court erred in refusing to address the correctness of the deputy's decision.

The next question is whether we should consider the merits of Liberty Mutual's appeal or remand the case to the district court for its decision on the substantive issues. Although we are not bound to do so, we may choose to proceed with review of issues that "have been fully briefed and argued in this court, ... [when] it is in the interest of sound judicial administration to decide [those] issues here." Barnes v. Iowa Dep't of Transp., 385 N.W.2d 260, 263 (Iowa 1986). Because the parties have fully briefed and argued the discovery issues on this appeal, we choose to decide those issues now.

IV. Are Materials in an Insurer's File Postdating a Denial of Benefits Relevant?

Iowa Rule of Civil Procedure 122...