TIMOTHY GREENWOOD, Employee/Petitioner, v. KAMPS, INC., and OLD REPUBLIC INS. CO., Employer-Insurer.
WORKERS’ COMPENSATION COURT OF APPEALS
JANUARY 18, 2008
VACATION OF AWARD - FRAUD. Where the employee was not alleging that he had been defrauded by the employer or insurer at the time of his settlement or that the employer and insurer had been at that time aware of any fraudulent conduct material to the case, and where there was no reason to distinguish the line of cases holding that fraudulent conduct by a non-party attorney is not grounds for vacation, the employee did not show good “cause” to vacate his award on the basis of fraud by a nonparty.
VACATION OF AWARD - NEWLY DISCOVERED EVIDENCE. Where the person making the false representation at the time of settlement was not deposed, even though the employee testified at the time that the representation was a lie and that he had witnesses to prove it, where instead of litigating his claim the employee elected to settle it, where the alleged new affidavit evidence addressed the employer’s very primary liability for the employee’s injury and not the severity of his disability or deterioration in his condition, and where more than twenty years had passed since the award on stipulation, the employee did not establish good “cause” to vacate his award on settlement on grounds of newly discovered evidence, and to hold otherwise would not serve the principle of fundamental fairness.
Petition to vacate award on stipulation denied.
Determined by: Pederson, J., Rykken, J., and Stofferahn, J.
Attorneys: Robert C. Falsani and Andrew P. Pierce, Falsani, Balmer, Peterson, Quinn & Beyer, Duluth, MN, for the Petitioner. Craig B. Nichols, Hansen, Dordell, Bradt, Odlaug & Bradt, St. Paul, MN, for the Respondents.
WILLIAM R. PEDERSON, Judge
The employee petitions this court to set aside an award on stipulation served and filed in this case on June 22, 1987, on grounds of fraud and newly discovered evidence. Concluding that the employee has not shown good cause to vacate the award, we deny the employee’s petition.
In June of 1986, Timothy Greenwood [the employee] began working as a truck driver for Kamps, Inc. [the employer], out of Norwood, Minnesota. On July 3, 1986, the employee allegedly injured his low back while in the course and scope of his employment with the employer. The employee was twenty-three years old at the time of his alleged injury, and, according to the parties’ subsequent stipulation for settlement, was earning a weekly wage of $450.00.
The employee initially sought medical treatment at the Buffalo Clinic, where he was seen on July 9, 1986, complaining of right hip and leg pain. He was diagnosed with low back pain and a possible herniated disc and was prescribed bed rest and Motrin. On July 29, 1986, he came under the care of Dr. Leo J. de Souza at the Hennepin County Medical Center’s Department of Orthopaedics. A CT scan was performed, which revealed evidence of posterolateral bulging at the L5-S1 disc, which suggested the possibility of a contained disc herniation.
On September 5, 1986, a First Report of Injury was completed and then signed by the employee’s attorney, indicating that on July 3, 1986, the employee was injured when he “fell once in Ashland, Wisc. and once in Norwood, Minn” and that notice was provided to the employer on July 7, 1986. Five days later, on September 10, 1986, the employee’s brother, Ernest Greenwood [Ernest], sent a letter to the employer, stating that the employee did not injure his back at work on July 3, 1986, but rather injured it on July 6, 1986, while “goofing around.” Ernest stated further in that letter that “[the employee] then made matters worse by getting into three car accidents, and having me punch him in the small of his back.” Two days later, on September 12, 1986, because of the employee’s lack of improvement, Dr. de Souza performed a hemilaminectomy with discectomy at L5-S1 of the employee’s back. On September 16, 1986, the employee’s First Report of Injury was filed with the Department of Labor and Industry.
On October 21, 1986, the employee filed a claim petition with the Department of Labor and Industry, seeking compensation for temporary total and permanent partial disability as well as medical benefits, as a result of a herniated lumbar disc allegedly sustained at work on July 3, 1986. The employer and its workers’ compensation insurer, Old Republic Insurance Company [the insurer], denied liability for the alleged injury and denied also that the employer had knowledge or due notice of the occurrence of the injury as required by Minnesota Statutes section 176.141. The Minnesota Department of Human Services thereafter sought to intervene in the proceedings for recovery of General Assistance and medical benefits paid on behalf of the employee. An Order Granting Intervention was issued on December 17, 1986.
At a deposition on March 3, 1987, the employee testified that, while on a trip to Ashland, Wisconsin, on July 3, 1986, he slipped while getting out of his truck and immediately felt a sharp pain in his lower back on the right side. He testified that he completed his delivery to Ashland and on the return trip to the terminal noted worsening back pain and right leg pain all the way down to his toes. He testified that he spoke to his dispatcher and supervisor later that day but did not tell them about his back and leg pain. He indicated that, when he arrived back at the terminal at about 6:00 p.m., he again slipped and fell and noted more pain in his right lower back. He testified that a mechanic was working at the terminal that night but that he did not tell him about either of his injuries. He testified that he rested the weekend of July 4, 1986, at the home of his sister and brother-in-law, Brenda and David Halderson. When asked about Ernest’s letter to the employer, the employee asserted that Ernest had been lying and that several other members of his family could directly contradict his letter. The employee testified also that he spent most of the month of July with the Halderson family and, in fact, had not even seen Ernest until August. He attributed Ernest’s statements to an argument that had led to the employee calling the police and informing them of an outstanding bench warrant for Ernest’s arrest and of Ernest’s whereabouts. He indicated that Ernest had consequently spent a night in jail and that the brothers had not spoken since that time.
In June of 1987, the parties, both represented by counsel, entered into a stipulation for settlement, wherein the employer and insurer agreed to pay $28,000.00 to the employee and $7,000.00 to the intervenor in full, final, and complete settlement of the employee’s claim, with the exception of “future reasonable and necessary medical and hospital expenses to cure and relieve him from the alleged personal injury of July 3, 1986.” In the stipulation, the employer and insurer contended as follows:
The settlement was approved by a compensation judge, and an award on stipulation was issued on June 22, 1987.
On July 13, 2007, the employee filed with this court a petition to vacate the 1987 award on grounds of fraud and newly discovered evidence. In support of that petition, the employee attached an October 26, 2006, affidavit from Ernest, in which the latter had stated that, because he had been angry with the employee, he had called the employer and falsely reported that the employee had not been injured on the job, but had injured himself in a water skiing accident. Ernest stated also in that affidavit that “[i]n reality [the employee] was not injured in a water skiing accident, but was injured in an accident at work.” In his own affidavit, also attached to the petition, the employee asserted that Ernest’s fraudulent statements concerning the work-relatedness of his injuries “devastated” his workers’ compensation case and hindered his ability to make a fair monetary recovery for his injuries. Further, on the advice of his attorney, he asserted, he had settled his workers’ compensation claim for much less than it would have been worth had Ernest not made false and fraudulent statements about his injuries. In its brief, the insurer responded that it no longer possessed the employee’s file and that, in checking with the Minnesota Secretary of State’s office, it had discovered that the employer was now listed as an “inactive domestic corporation.” Consequently, the insurer alleged, it was unable to locate any representatives of the employer or any witnesses regarding the events of July 3, 1986.
This court generally has wide discretion in determining whether to vacate an award. Krebsbach v. Lake Lillian Coop. Creamery Ass’n, 350 N.W. 2d 349, 36 W.C.D. 796 (Minn. 1984). The supreme court has noted that fundamental fairness is the overriding principle for determining whether an award should be set aside. Id.; Landon v. Donovan Constr. Co., 270 N.W.2d 15, 31 W.C.D. 135 (Minn. 1978); Wollschlager v. Standard Constr. Co., 300 Minn. 550, 220 N.W.2d 346, 27 W.C.D. 495 (1975). In the present case, the employee argues that, based upon grounds of fraud and newly discovered evidence, good cause exists to vacate the 1987 award on stipulation. We are not persuaded that Ernest’s alleged fraudulent representations or his affidavit recanting those representations constitutes either fraud or newly discovered evidence sufficient to vacate the award under Minn. Stat. § 176.461. Nor do we believe that vacating the parties’ settlement here would advance the principle of fundamental fairness espoused by the supreme court.
The Minnesota Supreme Court has indicated,
The required elements of a fraud action are: (1) there was a false representation by a party of a past or existing material fact susceptible of knowledge; (2) made with knowledge of the falsity of the representation or made as of the party’s own knowledge without knowing whether it was true or false; (3) with the intention to induce another to act in reliance thereon; (4) that the representation caused the other party to act in reliance thereon; and (5) that the party suffer pecuniary damage as a result of the reliance.
Specialized Tours, Inc. v. Hagen, 392 N.W.2d 520, 532 (Minn. 1986), citing Burns v. Valene, 298 Minn. 257, 261, 214 N.W.2d 686, 689 (1974), and Davis v. Re-Trac Mfg. Corp., 276 Minn. 116, 149 N.W.2d 37 (1967); see also Green v. Setterholm Fairway Foods, slip op. (W.C.C.A. Nov. 21, 1989), and Weise v. Red Owl Stores, Inc., 286 Minn. 199, 202, 175 N.W.2d 184, 187 (Minn. 1970).
The essence of the employee’s argument for vacation of the 1987 award based on fraud is that “a grave miscarriage of justice was perpetrated as a result of a fraudulent statement.” Although conceding that there is no allegation that the employer and insurer knew that the information provided to them by Ernest was false, the employee contends that the employer and insurer nevertheless utilized those fraudulent representations to force an unreasonably low settlement on the employee. This fraud by Ernest, he contends, “resulted in a perfect correlation of the employer’s financial gain and [the employee’s] financial detriment.” Citing Guptill v. Conlon Constr. Company, the employee asserts that the purpose of vacating a stipulation is to assure an injured employee of the opportunity of establishing his right to receive compensation in some measure proportionate to the degree and duration of his disability. Guptill v. Conlon Constr. Co., 239 Minn. 185, 188, 58 N.W.2d 264, 266, 17 W.C.D. 298, 301 (1953). Here, in light of Ernest’s admitted fraud, the employee argues, a denial of the employee’s opportunity to establish his right to receive proportionate compensation would be contrary to supreme court precedent. Under the facts presented here, we are not persuaded.
We note that fraud under Minnesota Statutes section 176.461 generally refers to fraud by one party against another. Cf. Strande v. Women’s Club of Minneapolis, 50 W.C.D. 527, 531 (W.C.C.A. 1994), aff’d 518 N.W.2d 555, 50 W.C.D. 532 (Minn. 1994) (petition to set aside award for fraud denied where the employee alleged fraudulent conduct by his own attorney and not by the employer or insurer). See also Puckett v. Glendenning Motorways, slip op. (W.C.C.A. Oct. 14, 1992); Tomaszewski v. World Aerospace Corp., slip op. (W.C.C.A. Oct. 30, 2002); Patterson v. Reliant Employment Group, slip op. (W.C.C.A. Feb. 4, 2002). In the present case, the employee does not allege that he was defrauded by the employer or insurer, nor does he allege that the employer or insurer was aware of, or a party to, Ernest’s alleged fraudulent conduct. We see no reason, as argued by the employee, to distinguish the line of cases involving the alleged fraudulent conduct of a non-party attorney from the conduct of any other individual not a party to a case. Accordingly, we deny the petition to vacate on grounds of fraud.
2. Newly Discovered Evidence
The employee argues, alternatively, that good cause exists for vacating the award on grounds of newly discovered evidence, pursuant to the factors set forth in Sorby v. DCI, Inc., No. WC04-167 (W.C.C.A. Oct. 1, 2004), and Gruenhagen v. Larson, 310 Minn. 454, 459, 246 N.W.2d 565, 569 (Minn. 1976). Pursuant to Gruenhagen,
The employee contends that he satisfied the Gruenhagen requirements, in that Ernest’s affidavit is relevant and admissible, his recent confession regarding his deceit could not have been discovered with the exercise of due diligence, his testimony is not merely collateral, impeaching, cumulative, or duplicative, and, had it been available in 1987, Ernest’s current testimony would have almost certainly affected the outcome of the employee’s case. We are not persuaded.
It is arguable that the admissions in Ernest’s affidavit might not have been discoverable at the time of settlement. Even that, however, is uncertain, in that it does not appear that Ernest was ever deposed or that his allegations in 1986 were made under oath. The employee, on the other hand, testified by deposition on March 3, 1987, that his brother was lying, and he named several family members, including his mother and sister, who would directly contradict Ernest. The alleged falsity of Ernest’s allegations was certainly known to the employee at the time of settlement, and Ernest’s recent affidavit merely challenges the authenticity of his own previous statement, that is, the new evidence is impeachment evidence.
Just as importantly, more than 20 years have passed since the award on stipulation was issued. It would be extremely difficult for the insurer to attempt now to properly defend in this matter, especially with respect to its defense of primary liability. “While compensation decisions do not enjoy the same finality as ordinary judgments, the parties are entitled to have their litigation laid to rest with some assurance of finality if there has been an opportunity to fully explore the issues and no substantial change has occurred since the time of the award.” Turner v. Fed. Reserve Bank of Minneapolis, 298 Minn. 161, 167-68, 213 N.W.2d 414, 418, 27 W.C.D. 149, 156 (1973) (emphasis added). The employee had the opportunity to more fully explore the issues in 1987, and we cannot say that that opportunity was not deliberately waived when the employee willingly entered into his settlement agreement with the employer and insurer. Had the employee felt the amount paid was insufficient, he could have rejected the employer and insurer’s offer and litigated the case. At the very least, the employee could have investigated whether his brother would have been willing to repeat the alleged false allegations under oath, but he chose not to do so.
The employee contends further that the issue of newly discovered evidence here is controlled by the supreme court’s decision in Monson v. White Bear Mitsubishi, 663 N.W.2d 534, 63 W.C.D. 337 (Minn. 2003). In Monson, the court held that “the development of new facts about the injury after the award, or even the subsequent discovery of facts in existence but unknown at the time the award was made, is sufficient to justify the vacation of an award.” Monson v. White Bear Mitsubishi, 663 N.W.2d 534, 539-40, 63 W.C.D. 337, 344 (Minn. 2003). Here, the employee contends, the newly discovered evidence is “the truth” and constitutes just the type of evidence contemplated by the Monson court. Monson is, however, distinguishable.
In Monson, the supreme court held that newly discovered evidence of the employee’s failed lumbar fusion surgery, a fact unbeknownst to either party at the time of settlement, together with a mutual mistake of fact as to the nature and severity of the work injury at the time of settlement, warranted reopening the matter. Importantly, the newly discovered evidence in that case pertained to the nature and severity of an admitted injury, and the court was seeking only to assure compensation proportionate to the degree and duration of disability a few months after the challenged settlement. Here, one of the significant issues at the time of settlement was whether the employee had sustained a work injury at all. The proof necessary to defend in such a case is far less available to the insurer after the fact - - particularly twenty years after the fact. Compensation proportionate to the degree and duration of disability takes on a whole new meaning in the context of a compromise on primary liability. Moreover, the “newly discovered evidence” in Monson was undisputed, which clearly influenced the court’s decision. Here, we simply have two different versions of the same event, neither of which is susceptible of absolute verification.
The supreme court has directed that “some caution should be exercised in vacating settlement awards so as to encourage employers-insurers to settle claims.” Maurer v. Braun’s Locker Plant, 298 N.W.2d 439, 441, 33 W.C.D. 66, 71 (Minn. 1980). In the present case, the new evidence itself is self-contradictory and has no bearing on the nature or severity of the employee’s alleged injury. In the context of a case where primary liability was denied, where Ernest’s representations were not the only basis for the settlement, where the employee was aware of the alleged falsity of Ernest’s representations at the time of the settlement and chose to settle despite having witnesses who would have rebutted Ernest’s claims, where more than twenty years have passed since the award, and where it would be virtually impossible for the employer and insurer now to defend against the claim, we do not believe that vacation of the settlement would serve the principle of fundamental fairness. We therefore deny the employee’s petition.
 The record implies that Ernest provided a formal statement to this effect on October 20, 1986, but only his letter dated September 10, 1986, is part of the record before us.
 The record does not disclose whether that First Report of Injury was also served on the employer.
 Pretrial notes from the January 26, 1987, hardship pretrial list as witnesses the employee’s mother, Ruth Peterson, his half-brother, Raymond Scott Peterson, his wife, Sherry, his sister, Brenda, and another person named Bonita Wright.
 The intervenor’s total claim for reimbursement of General Assistance and medical expense payments was $12,700.87.