JAMES MURPHY, Employee/Petitioner, v. NORTHWEST SHEETMETAL CO. and ACUITY GROUP, Employer-Insurer.
WORKERS’ COMPENSATION COURT OF APPEALS
MAY 2, 2007
No. WC07-102
HEADNOTES
VACATION OF AWARD - MISTAKE. A compromise settlement of a workers’ compensation claim is contractual in nature. Generally, a contract may be rescinded or avoided upon a showing of mutual mistake as to a material fact. A person who signs a contract may not avoid it on the ground that he or she did not read it or thought its terms to be different. If the terms of a contract are free from ambiguity and there is no fraud or misrepresentation, a mistake of one party alone as to the terms or subject matter of a contract is not a basis for vacation. In this case, where the stipulation for settlement explicitly closed out the disputed prescription expenses, where the employee was represented by counsel and does not claim any infirmity or disability at the time he signed the stipulation, where there was no allegation or evidence of fraud, misrepresentation or intent to deceive, and where counsel for the employer and insurer denied any mutual mistake, the employee failed to establish a mutual mistake of fact sufficient to vacate the award on stipulation.
Vacation of award on stipulation denied.
Determined by: Johnson, C.J., Rykken, J., and Pederson, J.
Attorneys: Harold H. Riehm, Ayers & Riehm, Mendota Heights, MN, for the Petitioner. Richard W. Schmidt, Cousineau McGuire, Minneapolis, MN, for the Respondents.
OPINION
THOMAS L. JOHNSON, Judge
The employee’s petition to vacate an Award on Stipulation, served and filed October 24, 2005, on the grounds of mutual mistake of fact. We conclude the employee has failed to establish good cause and deny the petition to vacate the stipulation.
BACKGROUND
James Murphy, the employee, was injured in a motor vehicle accident on February 26, 2002, while working for Northwest Sheetmetal Company. The employer and its insurer, Acuity Group, admitted liability for an injury to the employee’s head, shoulders, left arm, and cervical, thoracic and lumbar spine, and paid workers’ compensation benefits for these conditions. The employee also claimed he became depressed as a result of his personal injury. The employer and insurer denied liability for the claimed depression. The employee also filed a third-party personal injury claim.
In August 2005, the employee, his attorney and counsel for the third party participated in a mediation to attempt to reach a settlement of the employee’s third-party personal injury claim, the employee’s workers’ compensation claims, and the insurer’s potential subrogation interest in the third-party claim. The parties arrived at a verbal settlement of the case. Thereafter, Richard W. Schmidt, counsel for the employer and insurer, faxed to the employee’s attorney a draft of a stipulation for settlement. Accompanying the proposed stipulation was a letter discussing the proposed closeout of psychological or psychiatric expenses and related prescription or mileage expenses. In that letter, Mr. Schmidt stated:
As I understood our settlement, though, we are looking at a closeout of the psychological or psychiatric expenses and related prescription and mileage expenses at some point, whether that’s following your client’s upcoming appointment or at some reasonable date thereafter depending upon what may be recommended during the course of the upcoming appointment. Please advise concerning any other changes or corrections you may have.
(Ex. B to Affidavit of Harold H. Riehm.)
A Stipulation for Settlement was thereafter signed and an Award on Stipulation was served and filed on October 24, 2005. The stipulation for settlement contained the following paragraph:
That the Employer and Insurer shall waive their subrogation right to a future credit pursuant to Minn. Stat. § 176.061, Subd. 6(d) relative to the Employee’s third-party settlement pursuant to the case entitled James A. Murphy, Plaintiff vs. Raymond W. Toot and Marten Transport, Ltd., Defendants arising out of the February 26, 2002, personal injury as and for a full, final and complete settlement by the Employee of any and all claims past present or future arising out of the February 26, 2002, personal injury and any claimed consequential personal injury in the nature of depression for temporary total disability, temporary partial disability, permanent total disability, or permanent partial disability to the body as a whole, rehabilitation, retraining, escalation of benefits, penalties, interest, familial and/or custodial nursing services, remodeling expenses, durable medical equipment, work hardening expenses, health club expenses and related mileage expenses, psychological or psychiatric expenses, and related prescription or mileage expenses, in-patient or out-patient pain clinic expenses including, but not necessarily limited to, United Pain Center, Abbott Northwestern Hospital, and/or Medical Advanced Pain Specialists (MAPS) and related mileage expenses with the exception of claims for expenses for Botox injections and radio frequency denervation with any such claims subject to the defenses set forth herein, chiropractic expenses and related mileage expenses, acupuncture and acupressure expenses and related mileage expenses, massage therapy expenses and related mileage expenses, prescription expenses and related mileage expenses, Edquist or Heaton fees, Roraff/Irwin fees to date, or any other benefits that the Employee may be entitled to pursuant to the terms and limitations of the Minnesota Workers’ Compensation Act, except claims for future medical expenses other than those closed out above and future Roraff/Irwin fees shall remain open subject to the terms and limitations of the Minnesota Workers’ Compensation Act including, but not necessarily limited to, reasonableness, necessity, payment pursuant to the applicable fee schedules and treatment parameters. It is agreed and understood by the Employee that all claims, including claims for future medical expenses and attorney’s fees, are closed out with regard to any claimed consequential depression[.]
(Stip. for Settlement, ¶ VI.1., emphasis added.)
In his petition to vacate, the employee contends the parties agreed to leave open all reasonable and necessary medical expenses other than psychiatric and psychological medical expenses, prescriptions, and related mileage. In an affidavit, one of the employee’s former attorneys stated:
It is your affiant’s position that there was never any agreement that the Employee’s right to pharmacy prescriptions for pain medications would be closed out with this Stipulation, in view of the significant 30% closed-head injury disability sustained by the Employee.
(Ex. C to Affidavit of Harold H. Riehm.)
Notwithstanding the stipulation for settlement, the insurer continued to pay for various pain medications until August 2006. Thereafter, the insurer refused to pay for prescriptions for Naproxen, Vicodin and Neurontin which, the employee argues, were not intended to be foreclosed by the stipulation for settlement. The employee contends the parties made a mutual mistake of fact justifying a vacation of the award on stipulation. In response, the employer and insurer deny they were mistaken regarding the intent or effect of the stipulation. The employer and insurer assert they intended to closeout all prescription medications and related mileage expenses, and argue the language of the stipulation for settlement is clear. At most, the respondents argue, there was a unilateral mistake of fact that is insufficient to vacate the award on stipulation.
DECISION
This court has jurisdiction to set aside an award on stipulation upon a showing of good cause. Minn. Stat. §§ 176.461 and 176.521, subd. 3. Good cause includes “a mutual mistake of fact.” Minn. Stat. § 176.421, subd. 1.
A compromise settlement of a workers’ compensation claim is contractual in nature. As a general rule, a contract may be rescinded or avoided upon a showing of a mutual mistake as to a material fact. Winter v. Skoglund, 404 N.W.2d 786, 793 (Minn. 1987). A mistake is a belief that is not in accord with the facts. Restatement of Contracts (Second) § 151 (1981). A mutual mistake of fact occurs when opposing parties both misapprehend a fact material to the intended settlement of a claim. Shelton v. Schwan’s Sales Enters., 53 W.C.D. 110 (W.C.C.A. 1995)(summarily affirmed Sept. 5, 1995). A mutual mistake justifying rescission of a contract requires a “clear showing of a misunderstanding, reciprocal and common to both parties, with respect to the terms and subject matter of the contract, or some substantial part thereof.” Carpenter v. Vreeman, 409 N.W.2d 258, 261 (Minn. App. 1987).
Minnesota follows the objective theory of contract formation, under which the objective manifestation of mutual assent is determinative, rather than the subjective intention called a meeting of the minds. Markmann v. H.A. Bruntjen Co., 249 Minn. 281, 287, 81 N.W.2d 858, 862 (1957). Thus, it is the parties expressed intent which is the essential element in the formation of the contract rather than their subjective mental intent. Hill v. Okay Constr. Co., Inc., 312 Minn. 324, 252 N.W.2d 107 (1977). Accordingly, as a general rule, absent fraud or misrepresentation, a person who signs a contract may not avoid it on the grounds that he or she did not read it or thought its terms to be different. Gartner v. Eikilla, 319 N.W.2d 397 (Minn. 1982); Currie State Bank v. Schmitz, 628 N.W.2d 205 (Minn. App. 1987); Schmidt v. Debough Mfg. Co., 37 W.C.D. 608 (W.C.C.A. 1984)(summarily affirmed Apr. 10, 1985). If the terms of a contract are free from ambiguity and there is no fraud or misrepresentation, a mistake of one party alone as to the terms or subject matter of the contract is not a ground for rescission. Bakke v. Keller, 220 Minn. 383, 19 N.W.2d 803 (1945).
The stipulation for settlement closes out “psychological or psychiatric expenses, and related prescription or mileage expenses” and these expenses were the subject of Mr. Schmidt’s September 9, 2005, letter. However, the stipulation also explicitly closes out “prescription expenses and related mileage expenses.” The latter phrase is clear and unambiguous. While the employee may have not intended to foreclose his claim for all prescription expenses, his subjective intent is irrelevant. The employee was represented by counsel and does not claim he was incompetent or under any infirmity or disability when he signed the stipulation. Furthermore, there is no assertion of any fraud, misrepresentation or intent to deceive. While inequitable conduct or the sharp practice of an attorney may justify the vacation of a settlement agreement, there is no such assertion or evidence here.
The petitioner has failed to establish a mutual mistake of fact. Accordingly, the employee’s petition to vacate the award on stipulation is denied.