University of Iowa Hospitals v. Waters

• Decision Date: 22 January 2004
• Docket Number: No. 02-1017.,02-1017.
• Citation: 674 N.W.2d 92
• Parties: UNIVERSITY OF IOWA HOSPITALS AND CLINICS and State of Iowa, Appellees, v. Jack Edward WATERS, Appellant.
• Court: Iowa Supreme Court

674 N.W.2d 92

UNIVERSITY OF IOWA HOSPITALS AND CLINICS and State of Iowa, Appellees, v.Jack Edward WATERS, Appellant.

No. 02-1017.

Supreme Court of Iowa.

January 22, 2004.

Paul J. McAndrew, Jr. of Paul J. McAndrew Law Firm, Coralville, for appellant.

Thomas J. Miller, Attorney General, and Darrel Mullins, Assistant Attorney General, for appellees.

STREIT, Justice.

A custodian appeals from a district court judgment setting aside his workers' compensation award.The district court held the commissioner impermissibly based the award on a cumulative injury theory, when the employer only had adequate notice of an acute injury.The court of appeals affirmed.Because we do not find an abuse of discretion by the commissioner, we vacate the decision of the court of appeals, reverse the judgment of the district court, and remand to the district court for further proceedings.

I.Background and Facts

For nearly thirty years, Jack Waters worked as a custodian for the University of Iowa Hospitals and Clinics (Hospitals).He also has a long history of back problems.On June 21, 1997, Waters turned in his keys to his supervisor and said "This is it."

On February 3, 1999, Waters filed two claims for workers' compensation benefits from the Hospitals.In both claims, Waters alleged he injured his whole body, and specifically his back, at work.In the first, he alleged his "lower back gave way" on October 24, 1996, when "pushing loaded custodial cart around corner."In the second, he claimed he suffered an injury while "lifting, carrying, and dumping heavy trash at work" on June 16, 1997.

At Waters' deposition in June 1999, confusion arose over the date of the alleged June 16, 1997 injury.Waters' attorney stated he planned to "amend the date of injury to the last date that [Waters] worked, which I believe was June 21, 1997."

At the beginning of the hearing before the deputy commissioner, Waters' attorney again raised this issue.After pointing out Waters' history of back problems, he argued the commissioner had the discretion "to set the date of injury or cumulativetype injury such as this on the date that the evidence tends to show the injury occurred."The Hospitals objected.The Hospitals maintained Waters had given several different versions of what caused his injuries and did not "allege a cumulative injury."The Hospitals further argued Waters' petition alleged a "specific incident occurred."

The deputy ruled:

THE DEPUTY: All right.Well, I will consider the issue in the light of the evidence and pleadings and other things in the case.And I evaluate everything in order to decide the case.But I will indicate—or I do consider fixing the alleged date of injury understanding that the injury itself is disputed.I will understand—I understand that fixing the date of the alleged injury is one of the issues in the case.

This issue did not arise again before the deputy commissioner.The deputy commissioner found the Hospitals owed Waters nothing further for his first claim for benefits, but determined the Hospitals owed Waters permanent total disability benefits on the second claim.The deputy commissioner found

Jack Waters is currently disabled by the condition of his back and that the condition of his back is the result of multiple acute injuries and repetitive injury that he sustained while employed by the University of Iowa Hospitals and Clinics as a regular employee and as an inmate performing work release duties.It is also found that June 21, 1997 marked the point when the cumulative injury process progressed to the point that Jack was unable to continue working and he felt compelled to seek medical care because he knew that his symptoms had progressed to the point that surgery was likely....It is concluded that Jack Waters has carried the burden of proving by a preponderance of the evidence that he sustained cumulative trauma injury that arose out of and in the course of his employment on June 21, 1997.In this case the date of injury is Jack's last day of work.

The Hospitals filed an intra-agency appeal.In one of its four allegations of error, the Hospitals claimed "[t]he hearing officer's award of benefits under a cumulative injury theory is inappropriate as such a theory was never pled by the claimant, who described a specific traumatic injury."In final agency action, the chief deputy commissioner rejected the Hospitals' claims, including its allegation that an award of benefits under a cumulative injury theory was improper.Citing rulings in two prior intra-agency appeal decisions, the chief deputy wrote:

A claimant is not limited to a specific injury theory contained in the pleadings.If the evidence shows a cumulative injury when a traumatic injury was pled, an award based on a cumulative injury may be made unless substantial prejudice results to defendants.In this case, claimant's June 16, 1997 injury petition, later amended to June 21, 1997, could have been read as either claiming a cumulative or a traumatic injury.Even if read as a traumatic injury pleading, defendants were well aware of claimant's long-standing history of back injuries, and were not prejudiced by a finding of a cumulative injury.

The Hospitals sought judicial review, alleging the same errors asserted on intraagency appeal—including, but not limited to, the claim that "[t]he Workers' Compensation Commissioner's award of benefits [was] under a legal theory never pled by Claimant."The district court agreed with the Hospitals, and remanded for further proceedings.Citing due process principles elucidated in Oscar Mayer Foods Corp. v. Tasler,483 N.W.2d 824(Iowa1992), the district court reversed, holding it was fundamentally unfair to permit Waters to change his theory of the case on the day of the hearing, and that the Hospitals suffered prejudice as a result.The district court reasoned cumulative and acute injury cases have different elements and require different proof; cumulative injury cases, the court posited, almost always require expert testimony.Finding the Hospitals believed Waters was alleging an acute injury and was clearly unprepared to defend against a cumulative injury claim, the court held it was an abuse of discretion for the commissioner to base an award on a cumulative injury.

Waters appealed.Waters claimed (1)the district court should have reviewed the commissioner's decision for substantial evidence, not an abuse of discretion, and (2) applying the correct standard of review, the record contained sufficient evidence to support the commissioner's decision.The court of appeals affirmed the district court.Waters again raises these two issues for our review.

II.Standard of Review

"We review the district court decision by applying the standards of the [Iowa]Administrative Procedure Act to the agency action to determine if our conclusions are the same reached by the district court."Locate.Plus.Com, Inc. v. Iowa Dep't of Transp.,650 N.W.2d 609, 612(Iowa2002).Under the Iowa Administrative Procedure Act, a reviewing court may reverse the decision of the workers' compensation commissioner if it is unsupported by substantial evidence in the record or characterized by an abuse of discretion.SeeIowa Code § 17A.19(10)(2001)("court shall reverse, modify, or grant other appropriate relief ... if it determines that substantial rights of the person seeking judicial relief have been prejudiced because of [one of fourteen grounds, including lack of substantial evidence and when characterized by an abuse of discretion]")."The burden of demonstrating the required prejudice and the invalidity of agency action is on the party asserting invalidity."Id.§ 17A.19(8)(a).

Substantial evidence is "the quantity and quality of evidence that would be deemed sufficient by a neutral, detached, and reasonable person, to establish the fact at issue when the consequences resulting from the establishment of that fact are understood to be serious and of great importance."Id.§ 17A.19(10)(f)(1).While "courts must not simply rubber stamp the agency fact finding without engaging in a fairly intensive review of the record to ensure that the fact finding is itself reasonable... evidence is not insubstantial merely because it would have supported contrary inferences."Wal-Mart Stores, Inc. v. Caselman,657 N.W.2d 493, 499(Iowa2003)(quoting, in part, Arthur E. Bonfield, Amendments to Iowa Administrative Procedure Act(1998)at 68(1998)).The commissioner commits an abuse of discretion when the exercise of discretion is clearly erroneous or rests on untenable grounds.IBP, Inc. v. Al-Gharib,604 N.W.2d 621, 630(Iowa2000)(citingBrunner v. Brown,480 N.W.2d 33, 37(Iowa1992)).This standard, when applied in administrative proceedings, is the same as the abuse of discretion review used in evaluating the exercise of the district court's discretion in other contexts.Id.(citingFrank v. Iowa Dep't of Transp.,386 N.W.2d 86, 87-88(Iowa1986)).

III.The Merits

A.Substantial Evidence vs. Abuse of Discretion

The first issue raised for our review is whether the district court erred in reviewing the commissioner's decision for an abuse of discretion, as opposed to substantial evidence.We reject Waters' claim that the district court erred in failing to review for substantial evidence.The substantial-evidence standard only applies to factual findings.SeeIowa Code § 17A.19(10)(f)(authorizing reversal or modification on judicial review when the commissioner's decision is "[b]ased upon a determination of fact clearly vested by a provision of law in the discretion of the agency that is not supported by substantial evidence in the record ....)(emphasis added).Whether Waters' application for workers' compensation benefits sufficiently informed the Hospitals of the possibility of a cumulative injury claim¹ is not, first and foremost, a factual issue, but rather a matter within the agency's discretion.SeeStephenson v....