BERTHA PEREZ-RIVERA, Employee, v. MPLSP HOTEL CORP. and HANOVER INS. GROUP, Employer-Insurer/Appellants, and GROUP HEALTH PLAN, INC., d/b/a HEALTHPARTNERS and VOCATIONAL RESTORATION SERVS., INC., Intervenors.

The employer and insurer appeal from the compensation judge’s Order Disapproving Stipulation alleging the judge abused his discretion in failing to approve the stipulation for settlement submitted by the parties. We affirm. Because the Office of Administrative Hearings (OAH) Order Denying Motion to Disqualify Judge is an interlocutory order, the employer and insurer’s appeal from the order is dismissed.

The employee worked as a housekeeper for the employer at Comfort Suites. On August 9, 2013, while cleaning a room, she twisted her left knee and felt a pop with immediate pain in the knee. The employee sought treatment at an urgent care center the following day, was diagnosed with a knee sprain, advised to ice the knee and take ibuprofen, and was released to return to work on August 13, 2013. Between August 16 and September 23, 2013, the employee received treatment at HealthPartners Clinics, including physical therapy and a hinged knee brace.

The employee’s knee pain persisted, and an MRI scan was performed on October 4, 2013, that revealed a medial meniscus tear. The employee was referred to Todd Johnson, M.D., in the HealthPartners orthopedics and sports medicine clinic. Dr. T. Johnson performed surgery consisting of partial medial and lateral meniscectomies of the left knee on December 30, 2013. Following surgery, the employee was referred to physical therapy and kept off work. On February 14, 2014, the employee returned to work with the employer with restrictions. The employee continued to see Dr. T. Johnson for persistent knee pain through August 2014.

On September 12, 2014, the employee sought treatment for increasing knee pain. Dr. T. Johnson recommended another MRI scan as he was concerned about residual medial and lateral joint line pain. Upon review of the October 9, 2014, scan, Dr. T. Johnson indicated the edema along the medial tibial plateau had resolved, but noted progression of chondromalacia in the trochlear groove of the patella.

The employee was seen for a second opinion by Aimee Klapach, M.D., at Sports and Orthopaedic Specialists on January 14, 2015. The doctor’s impression was left knee pain post partial medial and lateral meniscectomies with osteoarthritis of the left knee. Conservative treatment and a functional capacity evaluation (FCE) were recommended. Dr. Klapach felt the employee’s ongoing arthritis was causing pain and would progress with time and that a knee replacement might be the ultimate treatment sometime in the future.

The employee returned to Dr. T. Johnson on January 16, 2015. The doctor indicated the employee’s symptoms were related to her medial and patellofemoral chondromalacia. A viscosupplementation injection was performed and work restrictions were continued. The employee was again seen by Dr. T. Johnson on February 27, 2015, over a year after the surgery. The employee noted no improvement with the knee injection and described constant pain. She rated the pain at 6 out of 10 in severity, and stated it occasionally woke her from sleep. The doctor suspected that a portion of her symptoms were due to knee joint chondromalacia. Dr. T. Johnson was of the opinion the employee had reached maximum medical improvement (MMI) and believed he had exhausted all treatment options. Dr. T. Johnson did not recommend a total knee replacement at that time but stated the employee may consider this in the future. The doctor referred the employee to occupational medicine for an FCE and a disability rating. The employee’s work restrictions, of cleaning 14 “regular rooms” per 8 hour shift, limited stair climbing, and avoidance of prolonged or repetitive kneeling, were continued. The employee was to return for treatment as needed.

The employee was seen by Gary Johnson, M.D., on March 20, 2015, who noted pain complaints both medially and laterally of the left knee. The employee was referred to physical therapy for a stretching and strengthening program, and then to Saunders Therapy for an FCE. The FCE was performed on April 7-9, 2015, and the employee returned for follow-up with Dr. G. Johnson on May 8, 2015. The doctor diagnosed medial and lateral menisci tears of the left knee treated with arthroscopic surgery, and ongoing left knee pain secondary to chondromalacia of the knee joint and patellofemoral joint. The employee was given work restrictions of lifting up to 30 pounds seldom, up to 25 pounds occasionally, and up to 10 pounds frequently; cleaning no more than 14 rooms in reasonably close proximity to each other during an 8 hour shift, minimizing extended walking; allowing a 10 minute sitting break after the first 4 hours of work and an additional 10 minute break after the following 2 hours of work; and limited cleaning of bathrooms. Dr. G. Johnson stated no return visits were scheduled as the employee had reached MMI on February 27, 2015, and assigned a rating of 0% permanent partial disability.

On March 23, 2015, the employee filed a Claim Petition seeking temporary partial and permanent partial disability benefits, medical expenses, and rehabilitation services. On July 2, 2015, the parties submitted a request for mediation to the Department of Labor and Industry. Prior to the scheduled mediation, the parties reached an agreement providing for a full, final, and complete settlement of the employee’s claims, including a close out of all future medical expenses, in return for a payment of $35,000.00 to the employee, less $7,000.00 in attorney fees.

On December 1, 2015, the parties submitted a Stipulation for Settlement to OAH. Compensation Judge Mesna issued an order disapproving the stipulation on December 4, 2015. At the request of the parties, a telephone conference was held on December 14, 2015. As agreed during the conference call, the judge issued an Order Striking and Rescinding the Order Disapproving Stipulation to allow submission of additional documentation.

On December 23, 2015, Michael J. D’Amato, M.D., an orthopedic surgeon, completed a records review at the request of the appellants. Dr. D’Amato concluded the employee sustained a medial meniscal tear resulting in a partial medial meniscectomy with current residual medial meniscal deficiency as the result of the work injury, and that the injury was permanent. The doctor also concluded the employee has a non-work-related pre-existing lateral meniscal deficiency and chondromalacia of the patellofemoral joint. Dr. D’Amato maintained the employee does not require any additional medical treatment for her work-related left knee injury and that additional treatment is not likely to be beneficial. Dr. D’Amato further agreed the employee has reached MMI, but disagreed with Dr. G. Johnson’s 0% permanency rating and assigned a 2% permanent partial disability for a medial meniscus tear with less than 50% of the meniscus surgically removed.^[2] Dr. D’Amato was of the opinion that any work restrictions are the result of her patellofemoral chondromalacia and not the work injury. Finally, Dr. D’Amato’s prognosis was that the employee would likely continue to have knee complaints, might have progressive degenerative joint disease in the future, and that it was possible she might need additional treatment in the future, including a possible total knee replacement, but stated this could not be predicted with any reasonable degree of medical certainty.

The parties jointly resubmitted the Stipulation for Settlement on December 31, 2015, with medical records attached. On January 8, 2016, the compensation judge again issued an Order Disapproving Stipulation, with a memorandum explaining the rationale for his decision, stating:

On January 20, 2016, the appellants filed a Motion to Disqualify Judge, alleging the judge had demonstrated an inability to provide a fair, objective, and impartial hearing in this case. On January 25, 2016, the OAH supervising judge issued an order denying the motion. The appellants have appealed from both the Order Disapproving Stipulation and the Order Denying Motion to Disqualify.^[3]

The appellants contend the parties’ stipulation for settlement is fair, reasonable, and in accordance with the Minnesota Workers’ Compensation Act, and that the judge abused his discretion in refusing to approve the stipulation.

A workers’ compensation stipulation for settlement is governed by Minn. Stat. § 176.521. Subdivision 2 provides that settlements shall be approved only if their terms conform to the Workers Compensation Act and that a judge “shall exercise discretion in approving or disapproving a proposed settlement.” The statute further reads:

The proposed settlement in this case purports to close out future medical benefits^[4] and, therefore, cannot be conclusively presumed to be reasonable, fair, and in conformity with the act, requiring the judge to exercise his discretion in approving or disapproving the stipulated agreement. The burden of proving the settlement meets this standard rests on the parties.

As a general rule, settlement of disputed claims without litigation is favored. Settlements avoid the delay and costs of litigation and expedite the granting of relief. Senske v. Fairmont & Waseca Canning Co., 232 Minn. 350, 45 N.W.2d 640, 16 W.C.D. 242 (1951); Wiehoff v. Indep. Sch. Dist. No. 15, 74 W.C.D. 41 (W.C.C.A. 2014). The appellants assert these factors are present in this case. They point out the parties reached settlement just before a scheduled mediation showing the parties began settlement negotiations before they incurred the added costs of mediation. The settlement, if approved, would avoid future litigation, including disputed entitlement to any future medical benefits.

The appellants contend the parties, represented by experienced attorneys, have reached a fair and reasonable bargained-for settlement, based upon the desire of the parties to have some closure and certainty in the result. The employee is willing to accept the agreed upon sum, knowing her claims could be larger, but also knowing that she might not receive any future benefits. We acknowledge that the risk that both sides face in terms of what may or may not occur in the employee’s future, or in litigation, is part of the reason that parties settle a case.

The appellants contend that, in this case, the judge did not explain what it is about the settlement he found to be unfair, unreasonable, or not in conformity with the act, and ignored the fact that any potential need for future medical treatment related to the work injury is disputed. The judge’s order, they argue, does not specifically state whether he found the stipulation to be (a) unreasonable, (b) unfair, or (c) not in conformity with the statute.

This is a misstatement of the record before us. As referenced in the first paragraph of his decision quoted above, the judge acknowledged that the employee has two medical conditions of the left knee “the causes of which are disputed.” Nowhere does the judge make a definitive decision on causation. To do so would be premature as no formal evidentiary hearing has yet taken place. One can reasonably conclude that if the judge specifically mentioned “disputed” causation in his memorandum, he considered this issue in his analysis. With respect to an explanation for his decision, the compensation judge concluded, based on the fact that the employee’s injury is permanent, and considering the medical information of record indicating the potential for significant future knee treatment, coupled with the fact that the settlement closes out any and all medical expenses of any type regardless of any future changes in the employee’s condition or functional abilities, the proposed settlement is not reasonable, fair, or in conformity with the Workers’ Compensation Act. After careful review of the record before us, we agree.

The appellants further argue that “somehow” the judge concluded the employee will have future problems and that these future problems will be related to the work injury. They assert there is no basis in the medical records submitted with the settlement for the judge’s conclusions. We disagree.

The record shows that the judge noted that both the employee’s and the appellants’ medical experts concurred that the employee had reached MMI and that medical treatment options were exhausted at that time. They, individually and consistently, also opined that future left knee treatment may be required. On January 14, 2015, Dr. Klapach noted that future surgery in the form of a total knee replacement might be warranted. Dr. T. Johnson, the employee’s treating physician, opined on February 27, 2015, that “I would not recommend a total knee at this juncture however she may consider [the surgery] in the future.” (Ex. C.) Orthopedic expert, Dr. D’Amato, opined that the employee sustained a permanent injury and assigned a 2% permanent partial disability for a medial meniscus tear in contrast to the employee’s treating doctor who assigned a 0% rating. Dr. D’Amato felt the employee would likely continue to have knee complaints, might have progressive degenerative joint disease in the future, and that it was possible she might need additional treatment in the future, including a possible total knee replacement. Contrary to the appellants’ assertion, the judge did not, nor can he, predict whether the employee will require future treatment or whether it will be causally related. Instead, based on the record submitted and his significant experience in the field involving knee injuries similar to those of this employee, the compensation judge could reasonably conclude that the proposed settlement was not in the best interests of the employee.

In Heinz v. Vickerman Constr., 306 N.W.2d 888, 33 W.C.D. 667 (Minn. 1981), the supreme court affirmed a decision of this court disapproving a proposed stipulation for settlement. The court noted discretion is vested with the judge and the parties retain the burden of proving that the settlement is reasonable, fair, and consistent with the act. The court concluded that the terms of the settlement and the circumstances disclosed by the records submitted by the parties permitted a determination that the settlement was not in conformity with the act and that the proposed settlement “[wa]s more likely than not to be opposed to the best interests of the employee.” Id. at 890, 33 W.C.D. at 671.

In reviewing a judge’s determination to approve or disapprove a settlement agreement, this court will not reverse absent an abuse of discretion. A judge abuses his or her discretion when the determination to approve or disapprove a settlement agreement is based upon a clearly erroneous conclusion given the record.^[5] We conclude that the judge did not abuse his discretion and could reasonably conclude that closing out all future medical benefits and costs may not be in the best interest of the employee given the employee’s injury and the medical opinions submitted.

The appellants have appealed from the supervising judge’s order denying their motion to disqualify the judge assigned to hear this case. The Workers’ Compensation Court of Appeals is a court of limited jurisdiction. Pursuant to Minn. Stat. § 176.421, subd. 1, appeals to this court may be taken from “an award or disallowance of compensation or other order affecting the merits of the case” (emphasis added). The preliminary question on this issue is whether the judge’s Order Denying Motion to Disqualify Judge is presently appealable. We conclude it is not.

It is well settled that this court lacks jurisdiction to consider or determine an appeal from an order denying a motion to disqualify a judge as the order is “interlocutory”^[6] and does not “affect the merits of the case” nor does it prevent a later determination on the merits. Johnson v. Midwest Precision Machining, 71 W.C.D. 105 (W.C.C.A. 2011) (and cases cited therein).

We conclude this court lacks jurisdiction and therefore dismiss the appellants’ appeal from the Order Denying Motion to Disqualify Judge. Procedurally, the order denying the motion to disqualify carries with it no finality in that the order is subject to an appeal from a decision on the merits.^[7]

In summary, the court concludes the compensation judge did not abuse his discretion in disapproving the proposed stipulation for settlement as the denial is grounded in the record and in the sound discretion of the judge. We dismiss the appeal from the OAH supervising judge’s Order Denying Motion to Disqualify Judge, as this court lacks jurisdiction to consider and determine an appeal from an interlocutory order.