Hagen v. Serta/National Bedding Co.

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LORRI HAGEN, Petitioner-Appellee, v. SERTA/NATIONAL BEDDING CO., LLC, and SAFETY NATIONAL CASUALTY CO., Respondents-Appellants.

No. 22-0684

Court of Appeals of Iowa

March 29, 2023

Appeal from the Iowa District Court for Worth County, Chris Foy Judge.

An employer and insurance carrier appeal the district court's ruling on a claimant's petition for judicial review of a decision of the workers' compensation commissioner.

Lindsey E. Mills of Smith Mills Schrock Blades P.C., West Des Moines, for appellants.

John M. Loughlin of Loughlin Law Firm, Cherokee, for appellee.

Considered by Bower, C.J., and Greer and Badding, JJ.

BADDING, Judge.

Serta/National Bedding Co., LLC and its insurer (collectively Serta) appeal the district court's ruling on judicial review that reversed the decision of the workers' compensation commissioner to exclude untimely expert witness reports from Serta's former employee, Lorri Hagen. Serta claims the commissioner did not abuse his discretion in excluding these reports because receipt of the evidence would have been unfairly prejudicial under Iowa Administrative Code rule 876-4.19(3)(e).

I. Background Facts and Proceedings

Hagen sustained an injury arising out of and in the course of her employment with Serta in February 2017, when a heavy cart rolled over her right foot. Hagen filed an arbitration petition in August 2019 seeking workers' compensation benefits. A hearing assignment order filed at the end of December set an arbitration hearing for September 25, 2020.

That order set deadlines for discovery, along with the exchange and filing of witness and exhibit lists and proposed exhibits. For the most part, the deadlines in the order tracked the time limits in Iowa Administrative Code rule 876-4.19(3), which governs "prehearing procedure, completion of discovery and case management in contested cases." This appeal involves Hagen's failure to abide by these deadlines.

Under rule 876-4.19(3)(b), Hagen was required to "certify to all other parties the expert's name, subject matter of expertise, qualifications, and a summary of the expert's opinions" if she intended to introduce evidence from an expert. She had to certify 120 days before hearing, Serta ninety days before hearing, and rebuttal sixty days before hearing.^[1] Iowa Admin. Code r. 876-4.19(3)(b). In turn, "[a]ll discovery responses, depositions, and reports from independent medical examinations shall be completed and served on opposing counsel and pro se litigants at least 30 days before hearing." Id. r. 876-4.19(3)(c). The parties were also required to serve witness and exhibit lists "and exchange all intended exhibits that were not previously required to be served" no later than thirty days before hearing. Id. r. 876-4.19(3)(d). The hearing assignment order further mandated that "[a]t least 14 days prior to hearing, the parties shall file proposed exhibits," with any written objections or motions to exclude evidence to be filed at least seven days before the hearing. See id. r. 876-4.19(3)(d).

Rule 876-4.19(3)(e), and the hearing assignment order, set out the following consequence for violating these deadlines:

If evidence is offered at hearing that was not disclosed in the time and manner required by these rules, as altered by order of the workers' compensation commissioner or a deputy workers' compensation commissioner or by a written agreement by the parties, the evidence will be excluded if the objecting party shows that receipt of the evidence would be unfairly prejudicial.

(Emphasis added.)

Proceeding under that rule, the deputy commissioner excluded two reports offered by Hagen as exhibits at the arbitration hearing: exhibit 10-an independent medical examination by Dr. John Kuhnlein, and exhibit 11-a vocational report by Tom Karrow. Neither Kuhnlein or Karrow were timely certified as experts, nor were their reports provided to Serta at least thirty days before hearing. The record discloses the following timeline as to these exhibits:

• November 5-7, 2019: On November 5, Hagen's counsel requested agreement from Serta to provide an independent medical examination under Iowa Code section 85.39 (2019). On November 7, Serta's counsel agreed to provide an independent medical examination.

• May 19, 2020: The examination was originally scheduled to occur and be conducted by Dr. Kuhnlein on this date, but it was rescheduled to June 23 because Dr. Kuhnlein was sick.

• June 23: The examination was conducted by Dr. Kuhnlein.

• August 19: Hagen's counsel provided updated discovery responses to Serta and listed Karrow as a vocational expert.

• August 27: Hagen's counsel received Serta's vocational report. Also, Hagen's counsel informed opposing counsel "that he has inquired into the status of the two reports and that they can be expected soon and thanked her for her patience." Serta's counsel did not respond to this email.

• September 10-11: Dr. Kuhnlein completed his report on September 10. Hagen provided the report to Serta the same date. Karrow also completed his vocational report on September 10, and Hagen provided the report to Serta the next day.

One week before the September 25 arbitration hearing, Serta filed a written objection to these exhibits, asserting the experts were not timely identified, their reports were not timely produced, and their consideration would be unfairly prejudicial to Serta. Specifically, Serta claimed:

The production of [Dr. Kuhnlein's] report after the 30-day deadline is prejudicial to Defendants as they were not aware of Dr. Kuhnlein's opinions regarding the extent of impairment and permanent work restrictions until 15 days prior to the Arbitration Hearing. In addition, Mr. Karrow's report concluding that the claimant is permanently and totally disabled was produced to Defendants 14 days prior to the Arbitration Hearing. Given the late production of the reports, Defendants are unable to respond or rebut Dr. Kuhnlein or Mr. Karrow.

Hagen resisted, arguing Serta was not prejudiced by the delay, as it was "aware the exhibits were forthcoming and all exhibits were provided prior to the exhibit filing deadline." To alleviate Serta's purported inability to respond to the exhibits, Hagen suggested "leaving the record open for an appropriate amount of time following the hearing to permit Defendants to rebut the reports, should they choose to do so."

The case proceeded to the arbitration hearing, where one of the disputed issues was whether Hagen was permanently and totally disabled. At the start of the hearing, the deputy commissioner considered Serta's request to exclude the exhibits. After hearing the parties' arguments on that issue, which included Serta's claim of "complete surprise," the deputy asked Serta's counsel for her position on leaving the record open for rebuttal evidence. Counsel responded that would not alleviate the prejudice because Serta would have "to go expend additional expenses and costs and time," which would cause further delay. Ultimately, the deputy sided with Serta, finding exclusion was proper "if there's an unfairly prejudicial instance, which I believe there is."

After the hearing, Hagen asked the deputy to reconsider his exclusion of the exhibits. The deputy denied the motion, reasoning:

The claimant argues that, despite flouting the long established procedural rules noted above, no prejudice occurred, and thus the undersigned should reconsider the ruling and admit the proposed exhibits into evidence. Failing to adhere to the well-established timelines discussed above causes an inherent prejudice to litigants. The defendants were prejudiced by late production of reports.... I agree with the defendants that leaving the record open to obtain rebuttal reports would only serve to delay the final disposition of this matter, which is why I declined, and continue to decline to do so.

In his ensuing arbitration decision, the deputy found Hagen failed to prove she is permanently and totally disabled, she reached maximum medical improvement on July 23, 2019, and she suffered an industrial disability of sixty percent. Both parties appealed to the commissioner. On the exclusion issue, while the commissioner found Serta's claim of "complete surprise" was not correct, he agreed "there was some element of surprise." Given the nature of the exhibits and the timing of their production, the commissioner found Serta "proved unfair surprise and prejudice." And while the commissioner agreed leaving the record open "is often the preferred remedy employed by deputy commissioners in similar circumstances," he found the deputy did not abuse his discretion in not exercising that option. The commissioner affirmed the deputy on the issues of permanent disability, maximum medical improvement, and industrial disability.

Hagen petitioned for judicial review in the district court challenging, among other things, the exclusion of the Kuhnlein and Karrow reports. After briefing from the parties the court entered a ruling reversing the commissioner's decision and remanding for further proceedings. The court found the deputy and commissioner decided to exclude the reports "without first making the necessary finding that admitting these reports would be unfairly prejudicial to" Serta, but instead "assumed that the prejudice to [Serta] inherent in the late disclosure and production of the reports by Hagen was sufficient, in itself, to warrant their exclusion from the record." The court found reliance on that assumption "constitutes an abuse of discretion and a failure to apply and interpret the law correctly." Alternatively, the court found there was no evidence in the record to support a finding of unfair prejudice. So the court reversed the agency's decision and remanded with...