Hagen v. Serta/National Bedding Co., LLC ( 2023 )

IN THE COURT OF APPEALS OF IOWA
No. 22-0684
Filed March 29, 2023
LORRI HAGEN,
Petitioner-Appellee,
vs.
SERTA/NATIONAL BEDDING CO., LLC, and SAFETY NATIONAL CASUALTY
CO.,
Respondents-Appellants.
________________________________________________________________
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. AFFIRMED.
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.
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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
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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.)
1 The rule provides the following exceptions that the parties have not contended
apply here:
Certification is not required to introduce evidence from an examining
physician pursuant to Iowa Code section 85.39, a treating physician,
or a vocational consultant if the expert witness is known by all parties
to have personally provided services to the claimant and the
witness’s reports are served on opposing parties prior to the date
when certification is required. The parties may alter these times by
written agreement.
Iowa Admin. Code r. 876-4.19(3)(b).
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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
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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
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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
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“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 directions for the commissioner to admit the reports and other
exhibits and to “leave the record open for whatever length of time he deems
sufficient to permit [Serta] an opportunity to file responsive reports, and then revisit
and rule on the issues.” Serta appeals.
II. Standard of Review
Iowa Code section 17A.19 (2021) governs judicial review of agency
decisions. See Neal v. Annett Holdings, Inc., 814 N.W.2d 512, 518 (Iowa 2012).
The district court acts in an appellate capacity in judicial-review proceedings. Id.When reviewing that decision on appeal, we apply the relevant standards of
section 17A.19(10) to determine whether we reach the same results as the district
court. Id. If so, “we affirm; otherwise, we reverse.” Id. (citation omitted).
The relevant standards here are those set forth in section 17A.19(10)(m)
and (n), which provide that relief may be granted on judicial review if the
“substantial rights of the person seeking judicial relief have been prejudiced”
because the agency action is “[b]ased upon an irrational, illogical, or wholly
unjustifiable application of law to fact” or “[o]therwise unreasonable, arbitrary,
capricious, or an abuse of discretion.”
III. Analysis
It is not disputed that, for the Kuhnlein and Karrow reports, Hagen missed
the deadlines for certifying experts, completing and serving of reports from
independent medical examinations, and exchanging of exhibits. See Iowa Admin.
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Code r. 876-4.19(3)(b), (d). Instead, the question is whether these reports were
properly excluded under rule 876-4.19(3)(e), which expressly provides that
untimely evidence will only be excluded “if the objecting party shows that receipt
of the evidence would be unfairly prejudicial.”2
On that question, Serta first claims that it was prejudiced by the late
disclosure of the reports because it was unaware of the reports’ conclusions before
receiving them, thus subjecting it to a potential “trial by ambush.” While Serta
claims surprise, it knew these reports, and the potential for differing opinions on
the extent of Hagen’s permanent disability, would be coming as early as November
2019. We agree with the dissent that “[k]nowing a report is coming as opposed to
having the expert reports available so that trial preparation can be meaningful are
two totally different considerations.” But Serta was nevertheless prepared for the
differing opinions, as its counsel told the deputy at the arbitration hearing: “[A]nd
now Defendants have been required to prepare for hearing within two weeks [with]
the two expert opinions.” So the trial-by-ambush claim is unfounded since Serta
had an opportunity to prepare a defense.
Second, Serta submits it “would have no ability to obtain new experts or
otherwise respond to the reports.” But Serta already had experts on the issues in
the reports—an independent medical evaluation report issued by its medical
examiner, Dr. Thomas Gorsche, and a very recently completed vocational report
2 The parties do not address the potential applicability of rule 876-4.36, which
separately allows “excluding or limiting evidence” upon a failure to comply with any
of the administrative rules. Because rule 876-4.19(3)(e) is more specific, it would
control. See Braaksma v. Bd. of Dirs. of Sibley-Ocheyedan Cmty. Sch. Dist., 981
N.W.2d 134, 139 (Iowa 2022).
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by Lana Sellner, both of which were admitted as evidence at the arbitration
hearing. Those reports themselves could have served as rebuttal responses to
Hagen’s exhibits. Or Serta could have taken advantage of the offer to hold the
record open for rebuttal, potentially from its previously retained experts, which the
commissioner noted is “the preferred remedy employed by deputy commissioners
in similar circumstances.” See Bos v. Climate Eng’rs, Inc., No. 17-0159, 2017 WL
6027162, at *4 (Iowa Ct. App. Nov. 22, 2017) (“[T]he agency offered Bos thirty
days to file a reply to the vocational report. Bos declined the offer. The offer of
additional time to rebut the report eliminated any prejudice from the late
disclosure.”). So Serta’s claimed inability to respond rings hollow.
Third, Serta argues “leaving the record open and obtaining rebuttal reports
only delays the final disposition of a case.” But Serta does not state how a delay
in final disposition would cause it unfair prejudice. And the record was already left
open by the deputy for post-hearing briefing from the parties. We accordingly
share the district court’s skepticism with the genuineness of Serta’s claimed desire
for final disposition of the case. Even if that desire was genuine, allowing additional
time would further the purpose of workers’ compensation statutes—to benefit the
worker—with no demonstrable unfair prejudice to Serta. See Schoenfeld v. FDL
Foods, Inc., 560 N.W.2d 595, 599 (Iowa 1997) (finding that the exclusion of an
evaluation report “would run contrary to the primary purpose of the workers’
compensation statute, which is for the benefit of the worker”).
It is true, as Serta argues, that these reports were not by a treating
physician, as was the case in Schoenfeld, 560 N.W.2d at 598–99, where our
supreme court found the commissioner abused his discretion in excluding an
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untimely report from the employee’s treating physician because there was no
“unfair surprise” to the other party. And it is also true that “Schoenfeld should not
be read so broadly as to require admission of evidence received after the cutoff
date on the basis the employer merely knew of the existence of the reporting
doctor.”3 Trade Pros., Inc. v. Shriver, 661 N.W.2d 119, 122 (Iowa 2003). But the
supreme court has stated a preference for “a reasonable balancing of the parties’
interests,” which involves admitting the report and providing the employer
additional time to respond. Id. at 122–23. And Schoenfeld and Trade
Professionals, both of which resulted in admission of the reports at issue,
concerned expert reports that were disclosed only six and four days before
hearing. See Trade Pros., 661 N.W.2d at 121; Schoenfeld, 560 N.W.2d at 597.
Here, we are dealing with roughly two weeks on an issue that Serta knew was
disputed and was prepared to address at the hearing.
We recognize our historical reluctance to interfere with the commissioner’s
imposition of sanctions for disclosure violations. See Trade Pros., 661 N.W.2d at
123; Schoenfeld, 560 N.W.2d at 598. But Schoenfeld and Trade Professionals
were decided before rule 876-4.19(3)(e) went into effect in 2004. Before then,
discovery deadlines were set by administrative case assignment orders. See Iowa
Admin. Code rs. 876-4.19, .20 (2003). For instance, the order at issue in
Schoenfeld did not assign a burden on the issue of prejudice to either party—it
was simply a question for the deputy or commissioner to decide. 560 N.W.2d at
3We think this admonition, and the few cases on the issue since Schoenfeld and
Trade Professionals, answer the dissent’s concern “that some might use this
majority opinion as a map to ignore deadlines and navigate around the rules.”
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597 (noting the case assignment order allowed additional exhibits “only if a party
was not unfairly surprised by their introduction into evidence”). At the time of the
hearing here, the rule placed the burden on the objecting party to “show[] that
receipt of the evidence would be unfairly prejudicial.” Iowa Admin. Code r. 876-
4.19(3)(e) (2021). So to the extent the rule grants the commissioner discretion,
we believe that discretion can be exercised only upon the objecting party’s showing
of unfair prejudice.4 See Thornberry v. State Bd. of Regents, 186 N.W.2d 154, 161
(Iowa 1971) (“‘[A]buse of discretion’ means no discretion to do what was done.”).
We agree with the district court that is where the commissioner went
wrong—excluding the reports simply because of the prejudice inherent in their late
disclosure, rather than holding Serta to its burden to show unfair prejudice from
the receipt of the evidence. See, e.g., IBP, Inc. v. Al-Gharib, 604 N.W.2d 621, 631
(Iowa 2000) (concluding the agency’s blanket exclusion of testimony from
4 Viewed in this way, the question of whether the objecting party met their burden
to show unfair prejudice arguably involves the commissioner’s application of the
law to the facts, which would be reviewed for correction of errors at law, as
opposed to an abuse-of-discretion standard. See Meyer v. IBP, Inc., 710 N.W.2d
213, 218–19 (Iowa 2006). We recognize that is not the standard used by our
supreme court in Schoenfeld or Trade Professionals, or by this court in reliance on
those cases. See, e.g., Bos, 2017 WL 6027162, at *4 (citing Trade Pros., 661
N.W.2d at 123). But, as discussed above, Schoenfeld and Trade Professionals
were decided before rule 876-4.19(3)(e) was adopted and without the assignment
of a burden on the prejudice showing. Either way, if the commissioner had no
“legal discretion” to exclude the reports absent a showing of unfair prejudice, then
doing so absent that showing would still warrant relief under an abuse-of-discretion
standard. See, e.g., Sparks v. Long, 11 N.W.2d 716, 718 (Iowa 1943) (noting the
discretion a trial court possesses to grant a motion for new trial “is a legal
discretion—one that must be exercised upon sound judicial reasoning”); accord
Stockwell v. Chi., C. & D.R. Co., 43 Iowa 470, 476 (1876) (“If a new trial is granted
upon insufficient cause or for reasons in conflict with the law, we must regard the
case as one of abuse of the discretion of the court.”); Johnston v. Percy Constr.,
Inc., 258 N.W.2d 366, 371 (Iowa 1977) (“[T]he bounds of fair discretion are
exceeded if the ruling lacks a sound legal basis.”).
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psychologists on causation was an abuse of discretion); cf. Square D Co. v.
Plagmann, No. 11-0655, 2011 WL 6673544, at *6 (Iowa Ct. App. Dec. 21, 2011)
(deferring to the agency’s exclusion of an untimely expert report even though no
finding of unfair prejudice was made). Such an interpretation (one automatically
equating late disclosure with prejudice) is at odds with the language of the rule and
swallows the admissibility avenue it provides for untimely reports.
Because Serta failed to show that the receipt of the evidence would be
unfairly prejudicial as required by rule 876-4.19(3)(e), we conclude the
commissioner abused his discretion in excluding the untimely reports. We
accordingly affirm the judgment of the district court.
AFFIRMED.
Bower, C.J., concurs; Greer, J., dissents.
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GREER, Judge (dissenting)
I dissent from the majority opinion because I disagree with the district court’s
finding that the commissioner abused his discretion by excluding the reports after
Hagen failed to meet well-established deadlines.
Though the commissioner generally stated that Serta was unfairly
prejudiced, I would infer that the commissioner made sufficient findings. See
Square D. Co. v. Plagmann, No. 11-0655, 2011 WL 6673544, at *6 (Iowa Ct. App.
Dec. 21, 2011) (“Although the deputy did not make a specific finding of fact
concerning the possibility of unfair prejudice to Plagmann, we infer that such a
finding was implicit in the deputy’s decision to sustain Plagmann’s objection and
to exclude the exhibit.”). Moreover, the commissioner outlined the appropriate
standard and recognized that unfair prejudice was a prerequisite to exclusion. As
the deputy stated in the written arbitration ruling, “[f]ailing to adhere to the well-
established timelines discussed above causes inherent prejudice to litigants. The
defendants were prejudiced by late production of reports.”
I would also agree with the commissioner that because service on
September 10 and 11 of two detailed expert opinion reports—one an independent
medical examination report (seventeen pages long) and the other a report from a
vocational expert (thirteen pages long)—was just days before the September 25
hearing, this delay likely would be prejudicial to any party as Serta argued.
Knowing a report is coming as opposed to having the expert reports available so
that trial preparation can be meaningful are two totally different considerations. I
do not find the commissioner’s choice to uphold the deadlines imposed rather than
employing a work-around to be an abuse of discretion.
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Given the deferential standard of our review, particularly toward an agency
decision, I would not find it was unreasonable for the commissioner to uphold the
deadlines and would reverse the district court’s decision. While the penalty of
excluding evidence is harsh, “[i]t is of no concern to a court reviewing an
administrative sanction whether a different sanction would be more appropriate or
whether a less extensive sanction would have sufficed; such matters are the
province of the agency.” Marovec v. PMX Indus., 693 N.W.2d 779, 782 (Iowa
2005).
More broadly, it strikes me that some might use this majority opinion as a
map to ignore deadlines and navigate around the rules. I think an agency should
have discretion to apply the standards so that does not become the pattern.