JOSHUA J. DEUTZ, Employee, v. RILEY BROS. CONSTR. and NORTH RIVER INS. CO./CRUM & FORSTER INS. GROUP, Employer-Insurer/Petitioners, and SHAFER CONTRACTING CO./SAFECO AM. STATES and MN DEP=T OF HUMAN SERVS., Intervenors.

 

WORKERS= COMPENSATION COURT OF APPEALS

AUGUST 1, 2002

 

HEADNOTES

 

VACATION OF AWARD - STANDING.  Where the parties bringing a petition to vacate a Findings and Order were not party to the litigation, the petitioners do not have standing to vacate the Findings and Order.

 

Petition to vacate findings and order denied.

 

Determined by Rykken, J., Johnson, C.J., and Stofferahn, J.

 

OPINION

 

MIRIAM P. RYKKEN, Judge

 

Riley Brothers Construction and its insurer, North River Insurance Company/Crum & Forster Insurance, petition to vacate Findings and Order of Compensation Judge Carol Eckersen served and filed August 17, 2000, on the basis of fraud.  We deny the petition.

 

BACKGROUND

 

On October 7, 1997, Joshua Deutz, the employee, sustained a work-related neck injury while working as a heavy equipment operator for Riley Brothers Construction (Riley Brothers), which was insured for workers= compensation liability by North River Insurance Company/Crum & Forster Insurance (North River).  The employee continued working after this injury, but was disabled from work for approximately 2 months between November 1997 and January 1998, as a result of his injury.  The employee eventually returned to work for Riley Brothers as an operator in March 1998, and continued to work there for about two months.

 

Riley Brothers and North River initially denied primary liability for the employee=s 1997  injury.  At a hearing held before Compensation Judge Peggy A. Brenden on June 8, 1998,  the nature of the employee=s injury was addressed, as were the issues of proper notice to the employer and the employee=s entitlement to temporary total disability benefits and medical expenses.  In Findings and Order served and filed July 13, 1998, the compensation judge concluded that the employee sustained a whiplash-type injury to his neck on October 7, 1997, and awarded temporary total disability benefits for a two-month period and payment of claimed reasonable and necessary medical expenses.  The compensation judge found that the employee had no restrictions as of January 13, 1998, and denied the employee=s claim for temporary total disability benefits after that date.  No appeal was taken from these Findings and Order.

 

In October and November 1998, and again in March and April 1999, the employee worked for Pipestone Concrete, operating a backhoe.  In the winter of 1998-99, the employee underwent physical therapy for neck symptoms. In January 1999, the employee=s physician restricted the employee from repetitive neck motions and jarring activities.  In late spring 1999, he worked for Knutson Construction, again operating a backhoe.

 

On July 15, 1999, the employee began working for Shafer Contracting Company, Inc. (Shafer), which was insured for workers= compensation liability by Safeco/American States (Safeco). On July 21, 1999, the employee was injured when he fell from his backhoe, landing on his back.  The employee felt pain in his neck, but continued working for two days, and sought treatment on July 23, 1999.  The employee stopped working on July 29, 1999.  Shafer and Safeco paid medical expenses and temporary total disability benefits commencing July 29, 1999.  In July 2000, Shafer and Safeco filed a petition to discontinue the employee=s benefits, which proceeded to hearing before Compensation Judge Carol A. Eckersen on April 27, 2000.  Among the issues addressed at that hearing were the nature and extent of the July 21, 1999, injury and whether the employee had restrictions which predated that work injury.  That hearing involved solely the issues against Shafer and Safeco.  Riley Brothers and North River were not parties at that hearing, as no claims were pending against them at that time. 

 

The employee testified at the hearing before Judge Eckersen that his symptoms after the 1997 neck injury were Avery light@ even thought he had continued to seek treatment for his neck after his 1997 injury. In her Findings and Order served and filed August 17, 2000, the compensation judge found that on July 21, 1999, the employee had sustained a temporary aggravation of a pre-existing cervical spine degenerative disc disease which lasted three months and that any restrictions after October 21, 1999, were not related to the July 21, 1999, work injury.^[1]  The compensation judge concluded that Shafer and Safeco could discontinue the employee=s workers= compensation benefits.  The employee did not appeal this decision. 

 

On November 8, 2000, the employee filed a medical request against Riley Brothers and North River based upon his October 1997 injury.  Shafer and Safeco intervened, and in March 2001, petitioned for reimbursement of medical and rehabilitation benefits they voluntarily paid beyond the  Atemporary aggravation@ period between July 21 and October 21, 1999, for which their liability had been adjudicated in the 2000 hearing with Compensation Judge Eckersen.^[2]  On October 5, 2001, the employee filed a claim petition against Riley Brothers and North River for temporary total disability benefits from and after December 15, 2000, penalties, and a rehabilitation consultation.

 

                        As a result of the current claims against Riley Brothers and North River, brought by both the employee and Shafer/Safeco, Riley Brothers and North River petitioned to vacate the Findings and Order issued by Judge Eckersen on August 17, 2000.  The basis for their petition to vacate is fraud; they argue that the employee=s inconsistent deposition and hearing testimony constituted fraud.  Riley Brothers and North River contend that at a deposition taken in  January 2000, and at hearing held on April 27, 2000, the employee minimized the effects of his 1997 injury.  By contrast, during a second deposition taken in June 2001 in conjunction with his current claim against Riley Brothers and North River, the employee testified that he has experienced constant dizzy spells, tingling and numbness in his left arm, and neck pain ever since his 1997 injury at Riley Brothers.  It is on the basis of the employee=s inconsistent testimony that Riley and Brothers allege fraud and petition to vacate the August 17, 2000, Findings and Order.  Shafer and Safeco object.

 

DECISION

 

Riley Brothers and North River allege that the employee committed fraud in the April 27, 2000, hearing before Compensation Judge Eckersen and that this fraud prejudiced them since they could not participate in the hearing to both defend themselves and to prove a claim against Shafer and Safeco.  They allege that because the employee presented testimony at the April 27, 2000, hearing which minimized the effects of his 1997 injury, and that because this was inconsistent with his later deposition testimony, the employee misrepresented his physical condition prior to his second injury in 1999.  They allege that the employee so testified with the intention of causing the compensation judge to find that the 1999 injury was permanent.  The employee=s testimony apparently did not cause such a result; Compensation Judge Eckersen found that the employee sustained a temporary work-related injury in 1999 while employed by Shafer.  Nevertheless, Riley Brothers and North River now allege that Judge Eckersen relied on the employee=s misrepresentations and therefore did not require the parties to join Riley Brothers and North River as necessary parties to the claim.  They contend that now they must defend against a claim by the employee and an intervention or reimbursement claim by Shafer/Safeco, since  they were unable to participate in the 2000 hearing.  Riley Brothers and North River claim that because the 2000 hearing did not include all necessary and indispensable parties to the litigation, the resulting Findings and Order, dated August 17, 2000, should be vacated.

 

The Workers= Compensation Court of Appeals may set aside an award for good cause.  Minn. Stat. ' 176.461.  By statute, after July 1, 1992, good cause is limited to the following: (1) a mutual mistake of fact, (2) newly discovered evidence, (3) fraud, or (4) a substantial change in medical condition since the time of the award that was clearly not anticipated and could not reasonably have been anticipated at the time of the award.  Minn. Stat. ' 176.461; Franke v. Fabcon, Inc., 509 N.W.2d 373, 376, 49 W.C.D. 520, 523 (Minn. 1993). 

 

The supreme court has enumerated the following elements of fraud:  (1) a false representation of facts; (2) the representation must deal with a past or present fact; (3) the fact must be susceptible of knowledge; (4) the representing person must know the fact is false; (5) the representing party must intend that another be induced to act based on the false representation; (6) the other person must in fact act on the false representation; and (7) the misrepresentation must be the proximate cause of actual damages.  Weise v. Red Owl Stores, Inc., 286 Minn. 199, 202, 175 N.W.2d 184, 187 (1970). 

 

Before considering the petition to vacate, however, we must determine whether Riley Brothers and North River have standing to bring the petition.  Generally, only parties to an award have standing to petition to vacate the award.  Under the relevant statute, Athe workers= compensation court of appeals, for cause, at any time after an award, upon application of either party . . . may set the award aside. . . .@  Minn. Stat. ' 176.461 (emphasis added).  See Merrill v. Eastwood Auto Works, 52 W.C.D. 446, 448-49 (W.C.C.A. 1995) (citing the general rule that only parties to a stipulation have standing to petition to vacate the settlement, the court noted that Minn. Stat. ' 176.521, subd. 3, provided that Aupon the filing of a petition by any party to the settlement, the court of appeals may set aside an award made upon a settle­ment, pursuant to this chapter@) (emphasis added).^[3]   Riley Brothers and North River argue that they have been prejudiced, and therefore that they have standing to petition to vacate the Findings and Order served and filed August 17, 2000.  They rely by analogy on Stoffel v. Rausch Mfg. Co., 46 W.C.D. 112, 113-14 (W.C.C.A. 1991), in which this court held that­ a re­maining non-settling par­ty to a stipulation may have standing to petition to vacate a stipulation where actual prejudice is shown.^[4]  Riley Brothers and North River contend that they were prejudiced by the employee=s representations since, if the employee had testified in his deposition taken before the April 2000 hearing consistently with the manner he is testifying now, the compensation judge would have required Riley Brothers and North River to be joined as necessary and indispensable parties and they would have had an opportunity to prove Shafer and Safeco=s liability at that hearing.

 

The employee, Shafer and Safeco were the only parties involved at the hearing on April 27, 2000, which resulted in the August 17, 2000, Findings and Order.  Riley Brothers and North River, the parties petitioning the court to vacate that Findings and Order, were not parties to that litigation.  The April 27, 2000, hearing addressed Shafer/Safeco=s petition to discontinue benefits, and Shafer/Safeco was not obligated to assert any claim against Riley Brothers/North River in conjunction with its petition to discontinue.  Neither was the employee obligated to join Riley Brothers/North River to the matter addressed at that hearing. Riley Brothers/North River were not necessary and indispensable parties to the hearing held on April 27, 2000.^[5]  They lack standing to petition to vacate the resulting Findings and Order.

 

Unappealed findings of a compensation judge have a res judicata effect.  Brix v. General Accident & Assurance Corp., 254 Minn. 21, 27, 93 N.W.2d 542, 546, 20 W.C.D. 281, 287 (1958); Denny v. Halcon Corp., 44 W.C.D. 290, 295-96 (W.C.C.A. 1990).  Regardless of whether the August 17, 2000, Findings and Order limit the employee=s future claims against Shafer/Safeco, and therefore derivatively limit future contribution claims Riley Brothers/North River may wish to bring against Shafer/Safeco, those Findings and Order remain final.  However, Riley Brothers/North River may use the employee=s testimony from the 2000 hearing and during both depositions in their defense of the employee=s current claims.

 

Riley Brothers/North River do not have standing to vacate the August 17, 2000, Findings and Order.  Accordingly, we deny their petition.