Reihe v. Midwest Viking, Inc., No. 17-0214 (Iowa App. Nov. 8, 2017), deals with the somewhat unusual situation where a district court remanded a matter to the workers' compensation commissioner for entry of an order nunc pro tunc correcting a compromise settlement agreement. Claimant argues that the district court improperly considered extrinsic evidence and that reformation of the contract was barred by judicial estoppel.
The settlement proposal that was agreed to indicated that defendants would pay roughly $75,000 less deductions of payment made to date (2/23/15), which totaled $21,080.12. The settlement documents indicated the settlement was roughly $75,000 less weekly payment made from 3/5/15 until settlement approval. Defendants would have received considerably more in credits under the original agreement than under the terms of the settlement documents. The settlement documents were approved and defendants sent a check to claimant in an amount equivalent to the original agreement ($51,35-.15). Defendants filed a motion for a nunc pro tunc order correcting the typographical error and this was denied for lack of jurisdiction.
Claimant filed a petition in the district court requesting that the unpaid portion of the award be paid. He also requested attorney's fees. Defendants filed a counterclaim for contract reformation. Claimant agreed that the original agreement had started credits in June of 2014, but argued that when the written agreement was signed, this changed the terms of the settlement. The district court found this was a drafting error and remanded to the commissioner for entry of a nunc pro tunc order.
On appeal, claimant argues the district court erred in considering extrinsic evidence, i.e. the original agreement between the parties. Because the settlement documents were not ambiguous, according to claimant, the court should not consider extrinsic evidence. The court notes that the cardinal rule of contract interpretation is to determine the intent of the parties when they entered into the contract. The court further finds that admission of parol evidence is permissible in actions for reformation so long as the evidence is relevant and material. Although normally a unilateral mistake is not grounds for reformation, the mistake of a scrivener does not require mutuality of mistake. The court concludes that there was a mistake that did not reflect the true intention of the parties.
Claimant also argues that he filed an action under section 86.42 and the district court's action was well outside the scope of an action under that section. The court found that the district court had jurisdiction to reform the contract. The court also rejected an argument based on judicial estoppel, because there was an error in the contract.
The district court had remanded the claim to the commissioner, but the court of appeals remands to the district court to reform the settlement agreement, declare the settlement agreement to be null and void and directing the commissioner to follow the procedures for consideration of whether to approve the reformed compromise settlement agreement.
This case serves as a cautionary tale for attorneys on both sides of the case to carefully peruse settlement documents before they are filed with the commissioner.
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