Riley v. Northland Geriatric Center ( 1988 )

AFTER REMAND

Griffin, J.

We granted leave in these workers’ compensation cases to resolve a conflict among panels of the Court of Appeals concerning the application of Gusler v Fairview Tubular Products, 412 Mich 270; 315 NW2d 388 (1981), reh gtd 414 Mich 1102 (1982), app dis 414 Mich 1102 (1983). Overruling Jolliff v American Advertising Distributors, Inc, 49 Mich App 1; 211 NW2d 260 (1973), we held in Gusler that the adjustment provisions of § 355¹ of the Workers’ Disability Compensation Act² 3apply only to the maximum, and not to the minimum, weekly rates established in § 351(1)³ of the act.

Taking into account the reliance on Jolliff during an interim of more than eight years, this Court determined that its ruling in Gusler should be implemented as follows:

In the interest of fairness we do not believe our holding should affect any disability compensation payments already made. Consequently, no recipient will be obligated to repay sums already received by reason of the erroneous computation formula we have nullified today. However, any benefits due and not yet paid or to be awarded after the date of this opinion shall be in accord with this ruling. [Id. at 298.]

The principal issue raised is whether the directed correction of JolliiFs error with respect to "benefits due and not yet paid” after Gusler is precluded by the doctrine of res judicata. We conclude that res judicata is not a bar. We further hold that Gusler applies to all benefits due or paid after December 30, 1981, the date of our opinion in that case, including benefits paid pursuant to awards entered prior to that date.

i

Before turning to a discussion of the issues, we shall examine the facts and the interrelated procedural history of these cases.

A. RILEY

On October 6, 1981, a referee awarded the plaintiff compensation of $119 per week on the basis of a rate determined in accordance with Jolliff. No appeal was taken. Two months later, this Court decided Gusler, and defendant petitioned for a reduction in plaintiffs compensation in accordance with Gusler, which the referee granted.

Thereafter, the Workers’ Compensation Appeal Board reversed, and its decision was affirmed by the Court of Appeals, but on the ground that this Court’s decision in Gusler is not binding precedent. The Riley panel noted that, after filing and entering its opinion in Gusler, this Court granted a motion for rehearing and thereafter dismissed the appeal upon stipulation. It was the conclusion of the Riley panel that our Gusler opinion had never been "issued” in accordance with then GCR 1963, 866. Riley v Northland Geriatric Center, 140 Mich App 72; 362 NW2d 894 (1985).

On appeal, this Court reversed on that point and held that our opinion in Gusler became binding precedent when it was filed on December 30, 1981, notwithstanding the subsequent grant of rehearing and dismissal. In addition, we remanded the case to the Court of Appeals for consideration of res judicata and retroactivity issues which had not been addressed in the earlier appeal. Riley v Northland Geriatric Center, 425 Mich 668; 391 NW2d 331 (1986).

On remand, the Court of Appeals held that res judicata barred a reduction of plaintiffs benefits. Riley v Northland Geriatric Center (On Remand), 160 Mich App 507; 408 NW2d 489 (1987).⁴ We then granted leave to appeal. 429 Mich 885 (1987).

B. JUNCAJ

In Juncaj, plaintiff was awarded benefits of $79 per week on the basis of Jolliff, and the award was not appealed. Thereafter this Court decided Gusler, and defendant’s insurer reduced plaintiffs level of benefits. Plaintiff then requested a hearing and argued that res judicata barred such a reduction. The referee denied relief, finding the reduction proper under Gusler. On appeal, however, the wcab reversed, relying on the Court of Appeals decision in Riley that Gusler is not binding precedent.

After the Court of Appeals denied leave to appeal, defendant applied to this Court, and we ordered the case held in abeyance pending our decision in Riley. Once we had decided Riley, we remanded the case to the Court of Appeals for consideration of res judicata and retroactivity issues raised by plaintiff. On remand, the Juncaj panel held, contrary to the Court of Appeals decision in Riley (On Remand), that res judicata is not a bar and that Gusler applies to all payments after December 30, 1981, the date of our opinion in that case. Juncaj v C & H Industries, 161 Mich App 724; 411 NW2d 839 (1987). We granted plaintiffs application for leave to appeal. 429 Mich 885 (1987).

C. MOORE

On March 26, 1981, a referee awarded plaintiff Moore $108 per week, the rate applicable under Jolliff. While defendant’s appeal to the wcab was pending, this Court decided Gusler, and the wcab then granted defendant’s motion to reduce plaintiff’s benefits in accordance with Gusler. However, the Court of Appeals thereafter held in Riley, that Gusler is not binding precedent. The wcab then affirmed a decision by the referee which reinstated the original award to plaintiff.

While a second appeal to the Court of Appeals was pending, this Court held in Riley that our December 30, 1981, decision in Gusler is binding precedent. The Court of Appeals then reversed the wcab and ordered a reduction in plaintiffs benefit rate in accordance with Gusler. Moore v Detroit Bd of Ed, unpublished opinion of the Court of Appeals, decided December 3, 1986 (Docket No. 86579).

On appeal, we remanded the case to the Court of Appeals with instructions to consider whether Gusler should be given retroactive effect. Thereafter, the Moore panel opined that Gusler applies to all payments made after December 30, 1981 (the date of Gusler), even though a case may have been decided prior to that date, relying on the implementing language set forth in our Gusler opinion. Moore v Detroit Bd of Ed (On Remand), 163 Mich App 130; 414 NW2d 160 (1987). After the Moore panel certified a conflict with the decision of the Riley remand panel, we granted leave to appeal. 429 Mich 885 (1987).

ii

In Riley and Juncaj, plaintiffs point out that their compensation rates were set prior to Gusler by decisions that were not appealed, and they argue that any post-Gusler reduction in benefits is barred by res judicata.⁵

The applicability of res judicata principles in workers’ compensation cases has been recognized. See Hlady v Wolverine Bolt Co, 393 Mich 368, 375; 224 NW2d 856 (1975); Theodore v Packing Materials, Inc, 396 Mich 152, 158; 240 NW2d 255 (1976); Gose v Monroe Auto Equip Co, 409 Mich 147, 161; 294 NW2d 165 (1980).

Nevertheless, in considering how res judicata is to be applied in that context, we have not overlooked that there is a fundamental difference between the lump-sum judgment in a tort action and the award of continuing weekly benefits in a workers’ compensation case. This difference was noted by Justice Levin who wrote, concurring, in Hlady, supra at 391:

Workmen’s compensation disability benefits, like social security and unemployment compensation benefits, are a form of income maintenance for persons whose wage-earning capacity has been suspended or terminated. A claimant’s entitlement to such benefits depends on the circumstances at the time of application and payment.

Res judicata is a judicially created doctrine which reflects appropriate concern for the use of judicial resources and the finality of litigation. However, it is not an inflexible doctrine, and its applicability depends in part upon the legal context in which a determination is made.

In a wide variety of circumstances, an employee’s future rate of workers’ compensation benefits is subject to change. Events in the future may operate to increase or decrease the amount of benefits to which he is entitled. For example, as a consequence of 1980 PA 357, certain employees injured between September 1, 1965, and December 31, 1979, became entitled after January 1, 1982, to receive a supplemental benefit under § 352 to offset increases in the cost of living. Furthermore, if a disabled worker recovers, or later works at a less lucrative job, the amount of his compensation is subject to adjustment, and res judicata is not a bar.

Recently, in Pike v City of Wyoming, 431 Mich 589; 433 NW2d 768 (1988), this Court faced a question similar in important respects to the issue presented in the cases now before us. In Pike, the amount of plaintiffs award was increased because his wife was conclusively presumed to be a dependent under one provision⁶ of the Workers’ Disability Compensation Act, and there was no appeal from that determination. Thereafter, this Court declared unconstitutional a similar gender-based presumption for widows under a different provision* ⁷ of the act. The defendant in Pike then sought a reduction in the level of plaintiff’s benefits, alleging that plaintiffs wife was not in fact dependent. The plaintiff argued that res judicata barred any redetermination of his award. We held that res judicata did not preclude an adjustment in the amount of the employee’s benefit:

Because the amount of an employee’s award is never final, res judicata principles do not apply to a change in the amount of benefits the claimant receives. This is consistent with the flexible nature of the workers’ compensation system which permits redetermination of the amount of a claimant’s benefits. [Pike, p 602.]

As in Pike, a new determination in these cases made on the basis of Gusler would affect only the amount of plaintiffs’ benefits and not their eligibility for workers’ compensation. As in Pike, we conclude that res judicata does not bar a redetermination of the amount of benefits to which plaintiffs are entitled.

Furthermore, we doubt that the Legislature could have intended the unfairness that would result if the position urged by plaintiffs in the instant cases were to be adopted. Under plaintiffs’ theory, many employees whose Jolliff-based rates were paid voluntarily by their employers before Gusler would be subject to post-Gusler reductions, while other employees whose employers happened to contest the rate before Gusler would not be affected.

We are satisfied that this Court was conscious of such considerations when it wrote, "In the interest of fairness we do not believe our holding should affect any disability compensation payments already made. . . . However, any benefits due and not yet paid or to be awarded after the date of this opinion shall be in accord with this ruling.” Gusler, supra at 298 (emphasis added). Likewise, if the effect of Gusler had been to increase benefits from and after the date of the opinion, res judicata would not have precluded plaintiffs from obtaining the increase.

We conclude that, by directing that its "new rule” was to apply to any benefits due and not yet paid, the Gusler Court implicitly stated that res judicata would not preclude adjustment of benefits after the date of its opinion. In so concluding, we are in agreement with Justice Levin’s separate statement in Riley, 425 Mich 690:

Were this Court to give preclusive effect to a prior adjudication that was based on Jolliff as to payments of workers’ compensation benefits after Gusler it would perpetuate, in the name of a judicial doctrine, a judicial error in construing a statute that thwarts legislative intent.

Accordingly, we conclude that post-Gusler adjustment of compensation rates as directed in Gusler is not barred by res judicata.

HI

We next consider how the change of law announced in Gusler is to be applied in the instant cases.

Sometimes a court which announces a change of law will refrain from going the next step to indicate how its new rule is to be applied. See Ross v Consumers Power Co (On Rehearing), 420 Mich 567; 363 NW2d 641 (1984), Day v W A Foote Memorial Hosp, 412 Mich 698; 316 NW2d 712 (1982), and Parker v Highland Park, 404 Mich 183; 273 NW2d 413 (1978). In such a situation, the prospective-retroactive issue is left for decision in a later case.

In Gusler, however, we did not delay that decision. This Court proceeded to provide specific and precise directions concerning the applicability of the "new rule,” stating:

Although our holding is based on what we perceive to have been the intent of the Legislature at the time of enactment of the provisions discussed, in practical effect, given the contrary interpretations of the law by the Director of the Bureau of Workers’ Compensation and the bureau’s subdivisions, the Workers’ Compensation Appeal Board and its hearing referees, and the Court of Appeals, today’s holding is not unlike the announcement of a new rule of law. Its application therefore should be treated accordingly. See Whetro v Awkerman, 383 Mich 235; 174 NW2d 783 (1970); Parker v Port Huron Hospital, 361 Mich 1; 105 NW2d 1 (1960); Bricker v Green, 313 Mich 218; 21 NW2d 105 (1946).

In the interest of fairness we do not believe our holding should affect any disability compensation payments already made. Consequently, no recipient will be obligated to repay sums already received by reason of the erroneous computation formula we have nullified today. However, any benefits due and not yet paid or to be awarded after the date of this opinion shall be in accord with this ruling. [Id. at 298.]

In Great Northern R Co v Sunburst Oil & Refining Co, 287 US 358; 53 S Ct 145; 77 L Ed 360 (1932), the United States Supreme Court made clear that state courts are not precluded by the federal constitution from determining whether their own law-changing decisions should be applied retroactively or prospectively. The Court stated:

We think the federal constitution has no voice upon the subject. A state in defining the limits of adherence to precedent may make a choice for itself between the principle of forward operation and that of relation backward. It may say that decisions of its highest court, though later overruled, are law none the less for intermediate transactions. . . . On the other hand, it may hold to the ancient dogma that the law declared by its courts had a Platonic or ideal existence before the act of declaration, in which event the discredited declaration will be viewed as if it had never been, and the reconsidered declaration as law from the beginning. . . . The alternative is the same whether the subject of the new decision is common law ... or statute. . . . The choice for any state may be determined by the juristic philosophy of the judges of her courts, their conceptions of law, its origin and nature. We review not the wisdom of their philosophies, but the legality of their acts. [Id. at 364-365.]

Courts have acknowledged that resolution of the retrospective-prospective issue ultimately turns on considerations of fairness and public policy. Peterson v Superior Court, 31 Cal 3d 147, 152; 181 Cal Rptr 784; 624 P2d 1305 (1982). In Placek v Sterling Heights, 405 Mich 638, 665; 275 NW2d 511 (1979), reh den 406 Mich 1119 (1979), this Court said:

This Court has overruled prior precedent many times in the past. In each such instance the Court must take into account the total situation confronting it and seek a just and realistic solution of the problems occasioned by the change.

We believe fairness requires that Gusler be applied to workers’ compensation awards made after December 30, 1981, the date Gusler was decided, and to all benefits due and not yet paid after that date where the award preceded the date of the opinion. Such a holding is fair because it allows employers to reduce their payments in accordance with the Legislature’s intent while protecting employees with respect to payments received before Gusler.

While fairness is a goal, certain rules or principles have evolved which provide guidance in resolving the retroactive-prospective dilemma. In People v Hampton, 384 Mich 669, 674; 187 NW2d 404 (1971), this Court adopted the three-part test set forth in Linkletter v Walker, 381 US 618; 85 S Ct 1731; 14 L Ed 2d 601 (1965). In Linkletter the United States Supreme Court ruled that its decision in Mapp v Ohio, 367 US 643; 81 S Ct 1684; 6 L Ed 2d 1081 (1961) (requiring states to exclude evidence seized in violation of the Fourth Amendment) should not be applied retroactively. In reaching that result, the Court weighed (1) the purpose to be served by the new rulé, (2) the extent of reliance on the old rule, and (3) the effect of retroactivity on the administration of justice.⁸

Application of the Linkletter test, also leads to the conclusion that Gusler be applied to awards made after December 30, 1981, and benefits due and not yet paid after December 30, 1981. Under Linkletter, we look first to the purpose of the "new rule” laid down in Gusler. It was to correct a serious error in the interpretation of a statute under which employees were being paid benefits in excess of the rate intended by the Legislature. We believe this purpose would best be furthered by applying Gusler only to payments made after the opinion’s date.

Second, we take account of the fact that employees and employers relied for more than eight years on the Jolliff holding that minimum as well as maximum rates were adjustable under § 355. Gusler’s implementing language appropriately recognizes that reliance, and it safeguards employees by not requiring repayment of any portion of benefits received prior to Gusler.

Finally, by applying the new rule only to payments after December 30, 1981, Gusler was designed to have a minimum effect upon the administration of justice. Cf. People v Auer, 393 Mich 667, 677; 227 NW2d 528 (1975), reh den 394 Mich 944 (1975).⁹

In Riley and Moore plaintiffs claim that by citing Whetro, Parker, and Bricker, supra, the Gusler Court indicated an intent that Gusler should apply only to cases commenced after December 30, 1981, and to cases pending on that date in the Bureau of Workers’ Disability Compensation, the wcab, or the Court of Appeals in which the minimum rate adjustment issue was raised. Plaintiff in Juncaj argues that Gusler should apply only to cases in which the injury occurred after December 30, 1981. We are not persuaded that the citations were for that purpose.

In Whetro, wherein this Court adopted the "positional risk” rule in workers’ compensation cases, we determined that the new rule would apply to claims arising after the date of that decision but would not apply to pending cases other than the case then at bar. Likewise, in Parker, this Court held that a new rule abolishing charitable immunity would apply only to that case and to cases arising after the opinion’s date. However, in Bricker, this Court stated that its law change abrogating imputed negligence was to apply to "pending” as well as to "future” cases.

We believe the Whetro, Parker, and Bricker decisions were cited to demonstrate that this Court has not always applied the general rule that law changing judicial decisions are to be given complete retroactive effect.¹⁰ Obviously, the three cases did not follow the same pattern. Accordingly, we conclude that the Court’s reference to the three cases was for a general purpose and not the specific purpose for which plaintiffs contend._

Furthermore, our interpretation is justified and required by the clear and unambiguous implementing language which this Court provided in the concluding paragraph of our Gusler opinion. As Justice Levin wrote in Riley, supra, 425 Mich 688-689:

There is nothing unfair in applying the rule stated in Gusler, which appears to have been reaffirmed today on varying analyses, from and after the date of the announcement of the opinions of the justices in Gusler.

The statement in the . . . concluding paragraph of the majority opinion in Gusler was surely adequate notice to the workers’ compensation department, the wcab, bench and bar, that Jolliif should no longer be followed. ... It would not be "unfair” to hold in the instant case that, as declared in Gusler, "any benefits due and not yet paid or to be awarded after the date of [the Gusler opinion] shall be in accord with th[e] ruling” stated in Gusler that the minimum rates are not subject to adjustment.

If we were to accept the interpretation urged by plaintiffs, we would effectively nullify that part of the implementing language which states that any benefits due and not yet paid after the date of Gusler shall be paid in accord with Gusler. Contrary to the argument advanced by plaintiffs, this Court did not limit its holding to cases commenced after December 30, 1981, and to cases pending on that date in the Bureau of Workers’ Disability, the wcab, or an appellate court in which the minimum rate adjustment issue was raised. Rather, Gusler clearly stated that its holding "not unlike ... a new rule of law,” was to apply to "any beneñts due and not yet paid or to be awarded after the date [that Gusler was decided] . . . Id. at 298 (emphasis added).¹¹

We conclude that the implementing language means what it says, and that payments after December 30, 1981, are to be adjusted in accord with Gusler, whether the award was made before or after Gusler.

IV

Although plaintiffs encourage us to reconsider and overturn our decision in Gusler, we decline the invitation to do so. We remain convinced that Gusler was correctly decided.

v

In Riley, we reverse the judgment of the Court of Appeals. In Juncaj and Moore, we affirm the judgment of the Court of Appeals.

Riley, C.J., and Levin, J., concurred with Griffin, J.

1 MCL 418.355; MSA 17.237(355).

2 MCL 418.101 et seq.; MSA 17.237(101) et seq.

3 MCL 418.351(1); MSA 17.237(351X1).

4 Riley died after commencement of this action and her son, Melvin King, personal representative of her estate, has been substituted as plaintiff.

5 In Moore there is no res judicata issue, as there has been no final award. Gusler was decided by this Court while defendant’s appeal to the wcab was pending.

6 MCL 418.353(l)(a)(i); MSA 17.237(353)(l)(a)(i).

7 MCL 418.331(l)(a); MSA 17.237(331)(l)(a).

8 In a civil case, Chevron Oil Co v Huson, 404 US 97, 106-107; 92 S Ct 399; 30 L Ed 2d 296 (1971), the Court applied essentially the same test with the addition of a threshold question: Does the decision clearly establish a new principle of law?

9 In Auer, this Court addressed the retroactivity of the then recently adopted objective test of entrapment. In holding that the new rule was to be prospective, this Court expressed concern about the effect retroactive application would have on the administration of justice, noting that "retrospective application would require in many cases new trials with the tremendous obstacle of reassembling now stale evidence.” Id. at 677.

10 See Martin v White Pine Copper Co, 378 Mich 37, 44; 142 NW2d 681 (1966). While this is the general rule for judicial decisions which make a substantive change in preexisting law, legislative changes in preexisting law are generally held to be prospective, unless a contrary legislative intent is clearly manifested, or unless the statute is procedural or remedial. Selk v Detroit Plastic Products, 419 Mich 1, 9-10; 345 NW2d 184 (1984).

11 In view of our holding concerning the applicability of Gusler, we find no merit in the argument advanced that defendant in Moore waived its right to relief because it did not raise the rate adjustment issue prior to December 30, 1981. As noted in n 5, defendant’s appeal from the referee’s decision in Moore was pending before the wcab when this Court decided Gusler. Furthermore, defendant moved promptly after Gusler for relief in accordance with its holding. We also note that both the wcab and the Court of Appeals addressed the rate adjustment issue in Moore.