The Alaska Workers' Compensation Board dismissed an employer's fraud petition after deciding that the parties had reached an enforceable settlement. The employer appealed the dismissal, arguing that any settlement of its fraud petition was void because the settlement did not meet the requirements set out in the Alaska Workers' Compensation Act and the Board's regulations. The Alaska Workers' Compensation Appeals Commission affirmed the Board's decision. The employer appeals, arguing that the Commission's interpretation of the statute is incorrect and that the Commission incorrectly interpreted our decisions about estoppel. We affirm the Commission's decision.
II. FACTS AND PROCEEDINGS
Lee Stenseth was injured at work many years ago. He and his employer, the Municipality of Anchorage, entered into a compromise and release agreement (C & R) in August 1996 in which Stenseth waived all future benefits except medical benefits in exchange for $37,000. Stenseth retired from the Municipality in 1996, but he continued to receive medical benefits for his work-related injury, including narcotic pain medication.
In late 2006 Stenseth was charged with multiple felonies related to selling or delivering narcotics that he had acquired, some from forged prescriptions modeled on the prescriptions for his work-related injury. Stenseth pleaded guilty to a number of felonies and served time in jail; he was released in June 2010.
In April 2012 the Municipality filed a petition under AS 23.30.250(b)
The parties agreed to mediate their dispute, with an Alaska Workers' Compensation Board hearing officer, William Soule, acting as the mediator. The mediation occurred in early November 2012. The letter from hearing officer Soule confirming the mediation asked that the parties "come with authority to settle, or a way to obtain adequate authority, during normal  Alaska business hours." At the time the Municipality was represented by attorney Trena Heikes; Law Henderson, the Municipality's workers' compensation administrator, did not attend the mediation in person but participated by telephone. Henderson later testified that Heikes called him periodically throughout the day to discuss the negotiations. Both Heikes and Henderson thought they had authority to settle the case.
The parties reached some type of agreement at the mediation. The following week Heikes wrote to attorney Robert Rehbock, who was representing Stenseth, to "summarize the settlement reached at mediation last Friday." Heikes summarized the agreement as follows:
Heikes then memorialized a post-mediation exchange:
She gave a deadline for a response.
Rehbock responded, essentially rejecting the Municipality's new proposal; he wrote, "We were and remain prepared to [compromise] on the original terms." He also said that he had been "directed to make a one-time further offer directly to the MOA, your principal[,] if you will allow your client to receive it." His letter did not contain the "further offer," but a letter from Heikes dated December 5 said:
Rehbock wrote and accepted the Municipality's offer on December 11, saying: "My client accepts your post mediation offer to pay $30,000.00 by latest February 22, 2013 in exchange for a complete release of all rights and claims against Mr. Stenseth arising of or in connection with AS 23.30.250." Rehbock also informed Heikes that Stenseth had "arranged for the funds" and that the funds were in Rehbock's possession. Rehbock suggested a "tender in exchange for releases to be simultaneously filed with the Board, so to meet any requirement of AS 23.30.012."
Heikes emailed Rehbock six days later, informing him of "an internal glitch," a "need to get higher ups to sign off." She then wrote, "Higher ups demand closure of narcotics. Under [the] circumstances that shouldn't be a problem, . . . right?" Rehbock responded in less than an hour, "No it is not ok. The offer was accepted." Rehbock tendered the funds, in the form of two cashier's checks, to the Municipality on or about December 18, 2012; the tender was refused.
The "glitch" to which Heikes referred was a misunderstanding about the limit of her and Henderson's settlement authority. Henderson later testified that the limit for settlement without approval was $50,000, but evidently neither Heikes nor Henderson understood the limit applied to forbearance. They thought they could settle as long as the amount set out in the agreement was $50,000 or less. Someone later corrected their misunderstanding.
The Board limited the February hearing to consideration of Stenseth's petition to dismiss the Municipality's fraud claim; it declined to consider the Municipality's petition, made orally at a prehearing conference, that the written evidence of settlement negotiations be excluded. In her opening statement, Heikes said that both she and Henderson thought they had authority to settle for the agreed-upon amount, but they did not in fact have authority. The Municipality argued that the settlement was void because it had not been submitted to the Board as required by AS 23.30.012. The hearing officer questioned both attorneys about the applicability of section .012.
Henderson and Stenseth were the only hearing witnesses.
Henderson explained the basis of the misunderstanding about authority. The limit for settlement without approval from others was $50,000, but because he generally negotiated payments to others rather than from them, it did not occur to either him or Heikes that the limit applied to the amount the Municipality would forbear. They both thought they had authority to settle when they attended the November mediation because they evidently thought they could settle as long as the amount in the agreement was $50,000 or less, even if the Municipality was compromising a claim that it alleged exceeded $100,000. In answer to a question from Heikes about whether there had "been a settlement agreement in this case," Henderson answered, "Not that I know of."
Stenseth testified about his understanding of the negotiations as well as his understanding of and response to the Municipality's discovery requests. He was cross-examined about his criminal convictions; he testified that none of the charges was "directly related to workers' comp." He agreed that he had not signed a C & R in 2013 as he had in 1996. Stenseth answered questions from his attorney about negotiations that happened after the December 11, 2012 letter accepting the Municipality's settlement terms; according to Stenseth, he was willing to agree to some additional conditions but not others.
In closing Stenseth argued that settlement agreements are contracts, that he and the Municipality had entered into a valid contract to settle his case, and that the Board should enforce the settlement. The Municipality argued that the settlement was void because it did not comply with AS 23.30.012 and that section .012 must apply because the Board's jurisdiction is limited to "claims."
In its final decision, the Board decided the parties had entered into a contract to settle the case in December 2012, finding the following: "Employer made an offer encompassing all the essential terms. Employee unequivocal[ly] accepted those terms. Employee's promise to pay and Employer's promise to forebear [sic] are consideration, and both parties' letters evince the intent to be bound." The Board decided the Municipality should be equitably estopped from denying the authority of its employees to settle the case on the terms set out in the December correspondence because there was no way Stenseth or his attorney could have known prior to accepting the offer that Henderson and Heikes had exceeded their authority.
With respect to the provisions of AS 23.30.012, the Board noted first that the statute had been amended in 2005 to dispense with Board approval of some settlements, including many settlements in which the parties are represented by attorneys licensed to practice in Alaska.
The Municipality appealed to the Commission, arguing that the Board erred in finding that there was a binding settlement between the parties. The Commission determined that (1) neither AS 23.30.012 nor the Board's settlement-agreement regulations applied to this case; (2) the Board's findings about the existence of a contract were supported by substantial evidence; (3) the Board properly applied equitable estoppel against the Municipality; and (4) there was no need to satisfy the technical requirements of the regulations. In deciding that AS 23.30.012 did not apply to this case, the Commission interpreted that statute as applying only to claims for injuries; because the fraud petition did not involve a claim for injury, the Commission reasoned that section .012 did not apply. The Municipality appeals.
III. STANDARD OF REVIEW
In an appeal from the Alaska Workers' Compensation Appeals Commission, we review the Commission's decision rather than the Board's.
We review questions of contract formation de novo when there are no factual disputes.
Whether a regulation applies to a case is reviewed using the independent judgment standard.
A workers' compensation settlement is a contract.
A. The Commission Correctly Determined That Substantial Evidence In The Record Supported The Board's Finding That The Parties Settled The Case In December 2012.
The Municipality does not directly question the Commission's decision that substantial evidence supported the Board's finding that a settlement contract was formed in the exchange of letters dated December 5 and 11. Instead, the Municipality argues that the Commission and the Board did not enforce the parties' most recent settlement. Whether a contract of settlement existed and what its terms encompassed is an underlying question that we address first.
We agree with the Commission that substantial evidence supported the Board's finding that the parties entered into a binding
The Municipality does not appear to take the position, as it did before the Commission, that no agreement was ever reached. Instead, it contends that, after Stenseth filed his petition to enforce the first settlement, the parties abandoned the December settlement and entered into a second settlement. Although "a party can abrogate an existing contract by accepting a new contract in its place,"
The Municipality argues that the continuing negotiations between the attorneys after Stenseth filed his petition to dismiss undercut the notion that the parties intended to be bound by the agreement set out in the earlier letters. But this argument ignores the fact that Stenseth had filed a new petition; resolving that dispute would provide both parties a reason for continuing to negotiate. There is nothing inconsistent in trying to negotiate an agreement on the new petition while continuing to assert that the Municipality was bound by the settlement created when Stenseth accepted the Municipality's December 5 offer of settlement. The factual record does not support the Municipality's assertion that a later settlement replaced the first.
B. The Commission Correctly Determined That AS 23.30.012 Did Not Apply To This Settlement.
The Municipality argues that the Commission reversed longstanding law and practice in deciding that AS 23.30.012 did not apply to void the settlement agreement in this case.
Alaska Statute 23.30.012 provides in relevant part:
This section permits an injured worker and his employer to settle a "claim for injury or death" and requires the parties to an agreement to file it with the Board "in a form prescribed by the director." The applicability of this section to the agreement the parties reached depends on whether they reached "an agreement in regard to a claim for injury or death under this chapter."
The Municipality first contends that the Commission erred in deciding that AS 23.30.012 and the Board's regulations about settlements do not apply unless a formal workers' compensation claim is filed. The Municipality also argues that the Board's regulations define "claim" broadly enough to encompass its fraud petition because that regulation defines "claim" as including "any matter over which the board has jurisdiction."
The Municipality's argument is based on a distinction between two uses of the word "claim" in workers' compensation proceedings,
We agree with the Commission that the Municipality's fraud petition is not a claim for "injury" as that term is defined in AS 23.30.395. This definition limits the applicability of AS 23.30.012(a), and the Municipality does not explain how its allegation of fraud is an "injury" as that term is used in the statute.
The Municipality argues that under the Commission's analysis, an employee who waives benefits when settling a fraud petition will not be accorded the protections of AS 23.30.012. While this hypothetical raises interesting questions concerning AS 23.30.012(b), Stenseth did not waive his future medical benefits in this settlement. We observe, however, that when an employee compromises benefits in a settlement, those benefits are from a work-related injury, and the resulting settlement would discharge some of the employer's liability. That is not the case here, where the employer sought reimbursement. We affirm the Commission's decision that AS 23.30.012 is not applicable to the settlement here.
C. The Commission Correctly Concluded That Equitable Estoppel Prevented The Municipality From Avoiding The Settlement.
In addition to relying on statutory and regulatory defenses to enforcing the settlement, the Municipality also asserted that no settlement existed because Henderson and Heikes exceeded their authority when they made the December 5 offer. The Board applied equitable estoppel to prevent the Municipality from avoiding the settlement, finding that all the elements of estoppel were met. The Commission agreed with the Board's analysis.
The Municipality argues here that the Commission applied equitable estoppel incorrectly because Stenseth could not reasonably have relied on the settlement and because there was no "resulting prejudice" to him. According to the Municipality, Stenseth's continuing efforts to settle the case after he filed his petition in December indicate that the first settlement did not exist and that Stenseth did not rely on it. The Municipality further contends that it would be unjust to make it abide by the terms of the settlement. Stenseth responds that (1) he suffered prejudice in the form of added attorney's fees and costs; (2) his reliance on the settlement was reasonable because the offer he unequivocally accepted was made by the Municipality's attorney, the Municipality's "sole representative" in the case; and (3) no special consideration should be given to the Municipality as a government here because it is acting solely in its capacity as an employer.
We agree with the Commission that equitable estoppel prevents the Municipality from denying the authority of its agents, Heikes and Henderson, to settle this case on
The Municipality does not contest that its agents asserted a position in the settlement negotiations, but it argues that no other element was met. It claims that Stenseth could not have relied on the offer because he continued to negotiate after he filed his petition to dismiss the fraud petition. But as we noted earlier, there is nothing inconsistent about attempting to negotiate a settlement related to the petition to dismiss while still maintaining that the original settlement should be enforced. Furthermore, there was no way Stenseth or his attorney could have known that Henderson and Heikes had exceeded their authority. As the Board found, neither Henderson nor Heikes understood the limits of their authority, and they were both "relatively high-level employees." The settlement offer was on Municipal letterhead and signed by the attorney for the Municipality. We hold that Stenseth's reliance on the Municipality's conduct in negotiating the December settlement was reasonable.
We agree with Stenseth that he suffered prejudice from the Municipality's attempt to avoid the settlement. Stenseth incurred additional attorney's fees and costs after the Municipality refused the tender of funds from Stenseth; the additional fees were a direct consequence of the Municipality's actions.
Finally, the estoppel serves the interest of justice. In evaluating the last element, we have approved balancing "the gravity of the injustice to the citizen if the doctrine is not applied" and "the injury to the commonwealth if the doctrine is applied."
We AFFIRM the Commission's decision.