CONSIDERED ON BRIEFS ON FEBRUARY 12, 2018
APPEAL
FROM THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT HUGHES
COUNTY, SOUTH DAKOTA THE HONORABLE MARK BARNETT Judge
SCOTT
N. HEIDEPRIEM KASEY L. OLIVIER of Heidepriem, Purtell &
Siegel LLP Sioux Falls, South Dakota Attorneys for claimant
and appellee.
J.G.
SHULTZ of Woods, Fuller, Shultz & Smith, P.C. Sioux
Falls, South Dakota Attorneys for defendants and appellants.
GILBERTSON, Chief Justice
[¶1.]
Tammy Lagler suffered a workplace injury while employed by
Menard Inc. The South Dakota Department of Labor and
Regulation awarded Lagler lump-sum,
permanent-total-disability compensation but denied her
request for attorney's fees. On appeal, the circuit court
affirmed the Department's decision to award compensation
but reversed the decision to award it as a lump sum. The
court also reversed the Department's denial of
attorney's fees. The parties each appeal various aspects
of the court's decision. We affirm.
Facts
and Procedural History
[¶2.]
On April 21, 2007, then-47-year-old Lagler injured her right
ankle while working in the garden center of the Sioux Falls
Menards.[1] While stepping off a raised platform,
Lagler lost her balance and landed on her right foot. She
heard a "pop" and felt a sharp pain on the inside
of her right heel that extended up the back of her leg to the
inside of her knee. Lagler also suffered minor injuries to
her knee and elbow. Her ankle immediately swelled and was
painful. Hours later, Lagler sought medical care. A
physician's assistant (P.A.), Rodney Ridenour, examined
Lagler's ankle and after ordering imaging, determined
that the ankle was sprained and not fractured. Several days
later, Lagler was examined by Dr. Ronald Rossing, who also
diagnosed Lagler's injury as a sprain. Dr. Rossing fit
Lagler with a cast shoe and advised several work
restrictions: wear the cast shoe, limit stair climbing, no
lifting over 25 pounds, and no walking for longer than 45
minutes at a time.
[¶3.]
Lagler continued to work at Menards. For its part, Menards
accommodated Lagler's work restrictions. But Lagler
continued to experience pain, and on June 6, 2007, she
consulted Dr. William Bell, a board-certified orthopedic
surgeon. Dr. Bell fit Lagler with a controlled-ankle-motion
(CAM) boot and requested approval for a bone scan, which was
approved by Menard's insurer, Zurich American Insurance
Co. On July 2, Dr. Bell reviewed the bone scan, diagnosed
Lagler with compression fractures in her right foot, and
determined she should continue wearing the CAM boot for
another four weeks. By August 1, Lagler was still
experiencing significant pain even though new imaging showed
"solid union of her fractures." Dr. Bell suspected
the straps of the CAM boot were responsible for Lagler's
continuing pain. Although Dr. Bell concluded Lagler could
safely transition out of wearing the boot, she continued to
wear it.
[¶4.]
Lagler's condition did not improve, but physical
examination revealed no objective reason for her pain. On
September 5, 2007, writing in Lagler's medical records,
Dr. Bell noted: "[Lagler] is in for follow-up on her
foot pain. She's really not doing any better. She's
still complaining of a tremendous amount of kind of ankle,
hind foot, mid foot pain." On September 24, after
receiving Zurich's approval, Dr. Bell ordered magnetic
resonance imaging (MRI) of Lagler's right ankle and foot.
Based on the MRI, Dr. Bell determined that there were no
abnormalities and that Lagler's ligaments and tendons
were "intact without significant degenerative
change." Unable to identify a cause of Lagler's
continuing pain, Dr. Bell referred Lagler to another
physician, with Zurich's approval.
[¶5.]
Lagler began seeing Dr. David Watts, another board-certified
orthopedic surgeon. On October 2, 2007, Lagler reported pain
along her right instep. Dr. Watts injected lidocaine, a local
anesthetic, into Lagler's posterior tibialis tendon, and
she experienced nearly total relief. But when Dr. Watts asked
Lagler to perform a single heel raise, she was not able to do
so. Dr. Watts diagnosed Lagler with posterior tibialis
tendinitis and concluded it was related to work. After
conservative treatments were unsuccessful, Dr. Watts
performed surgery on Lagler to repair the tendon. During
surgery, Dr. Watts discovered that Lagler's tendon was
frayed. Dr. Watts concluded that because Lagler had
continuous pain in the same area since the April 2007
accident, her tendinitis and subsequent surgery resulted from
a work-related injury.
[¶6.]
Following surgery, Lagler was fitted with a
progressive-weight-bearing CAM boot for rehabilitation. But
on April 30, 2008, only three months after surgery, Lagler
reported to P.A. Angela Majeres, who worked with Dr. Watts,
that she had a resurgence of pain and new tenderness along
her Achilles tendon. On June 2, Lagler returned to Dr. Watts
and reported that while she no longer had pain in her
posterior tibialis tendon, she was experiencing new pain
along her Achilles tendon. Dr. Watts diagnosed her with
Achilles tendinitis. He restricted her to sedentary work
only.
[¶7.]
Lagler continued to experience worsening and new pain. On
July 30, 2008, Dr. Watts diagnosed Lagler with "Achilles
tendinitis with retrocalcaneal bursitis." Retrocalcaneal
bursitis is an inflammation of the bursa, which is a
fluid-filled sac located between the tendon and bone. Dr.
Watts opined that the immediate cause of the inflammation was
a congenital deformity in Lagler's foot known as
"Haglund's deformity," which is a condition
where the back of the heel pokes into the soft tissue near
the Achilles tendon. In Dr. Watts's opinion, wearing a
CAM boot after the April 2007 injury caused Lagler to change
her gait, which in turn caused her congenital condition to
become symptomatic. Thus, Dr. Watts concluded that
Lagler's pain ultimately stemmed from her work-related
injury. On August 6, 2008, Dr. Watts sought approval from
Zurich to perform a second surgery on Lagler.
[¶8.]
Zurich assigned claims specialist Mary Lemieux to
Lagler's case.[2] Lemieux's notes indicate she contacted
Dr. Watts's office on August 6, 2008, to request
information on the proposed procedure. Viewing the delay as a
refusal to cover the second surgery, Lagler filed a petition
for a hearing with the Department on August 28. Lemieux's
notes during this time indicate she made several attempts to
obtain information from Dr. Watts's office. On September
15, records indicate a 5.8-minute-long telephone call
occurred between Lemieux and one of more than fifty
extensions at Dr. Watts's office. Lemieux's notes
describe the September 15 call: "Angie Roberts, Dr.
Watts' nurse, called me. We discussed the etiology of
this. Can be due to heels, i.e., pump bump but really
it's more of an idiopathic condition. Not related to
ankle injury. Is she then disabled due to the Haglund's?
Yes, not due to the original injury." Testimony would
later establish, however, that not only was this conversation
not noted in Lagler's records, nobody in Dr. Watts's
office is named "Angie Roberts." On September 17,
without completing either an independent medical examination
or an independent examination of Lagler's medical
records, Zurich sent a fax to Dr. Watts's office that
officially denied payment for Lagler's second surgery.
And on September 22, Zurich stopped all disability payments
to Lagler.
[¶9.]
On October 27, 2008, Lagler was examined by another
orthopedic surgeon, Dr. Eric Watson. Dr. Watson agreed with
Dr. Watts's diagnosis regarding Haglund's deformity
and retrocalcaneal bursitis. Dr. Watson also concluded that
the surgery proposed by Dr. Watts would relieve Lagler's
pain, but Dr. Watson did not express an opinion as to whether
Lagler's April 2007 injury caused her current symptoms.
Believing that Lagler was running out of nonsurgical options,
Dr. Watson recommended Lagler undergo a second surgery to
correct her Haglund's deformity and to remove the
inflamed bursa.
[¶10.]
After first denying coverage for a second surgery and
terminating compensation, Zurich then engaged Dr. Richard
Farnham to conduct an independent examination of Lagler's
medical records.[3] Dr. Farnham did not physically examine
Lagler; instead, he reviewed the treatment records of P.A.
Ridenour and Drs. Rossing, Bell, Watts, and Watson. Dr.
Farnham concluded that Lagler's April 2007 injury did not
cause either her posterior tibialis tendinitis or her
Haglund's deformity. He also concluded that not even
Lagler's first ankle surgery was causally related to the
April 2007 injury.
[¶11.]
On February 11, 2009, Lagler accepted Dr. Watson's
recommendation, and Dr. Watson performed the surgery on
February 19. Following her second surgery, Lagler initially
reported that her condition was improving. But by the end of
April 2009, she complained of swelling in her foot. Dr.
Watson directed Lagler to engage in only sedentary work until
July 15 and to work no more than 35 hours per week as
tolerable. Eventually, Lagler could not tolerate even 35
hours per week, so on June 11, 2010, Dr. Watson changed the
restriction to a maximum of 30 hours per week. Dr. Watson
also referred Lagler to Dr. Jerry Blow, another
board-certified physician. Dr. Blow evaluated Lagler on
August 19 and reviewed her medical records and Dr.
Watts's deposition. Dr. Blow agreed with Dr. Watts that
Lagler's April 2007 injury was responsible for her
posterior tibialis tendinitis and retrocalcaneal bursitis.
[¶12.]
The financial and emotional impact of the foregoing on Lagler
was severe. While she continued to work throughout 2007, she
had no income between September 2008 and April 2009. And
after returning to work, her physical limitations reduced the
number of hours she could work in a week and, therefore, her
income. Lagler did not have medical insurance, so when Zurich
denied coverage for the second surgery, she had to borrow
money from family members and cash in part of her retirement
to make the down payment for the surgery. Zurich's
termination of all workers'-compensation payments further
reduced her ability to meet her financial obligations. In
February 2011, Lagler's mortgagee foreclosed on her home.
Lagler's daughter offered her a home in Winner, South
Dakota, and Lagler accepted because of both her need for a
home and the emotional support her daughter could provide.
Lagler terminated her employment with Menards on April 11,
2011. After moving to Winner, Lagler begin seeing Dr. Teresa
Marts, who changed Lagler's work restrictions to
sedentary only.
[¶13.]
Lagler's workers'-compensation claim came before the
Department for the first time on May 10, 2011. The parties
agreed to bifurcate the proceedings. At the May 10 hearing,
the Department considered whether Lagler's April 2007
injury was a major contributing cause of her need for two
ankle surgeries. The Department issued a decision favorable
to Lagler on September 9, 2011, concluding that both
surgeries were compensable. The Department entered factual
findings and legal conclusions on October 24. On February 3,
2012, the Department issued an order awarding Lagler $22, 096
in unpaid medical bills and prejudgment interest.
[¶14.]
On September 20, 2012, the Department held a second hearing.
At the second hearing, the Department considered whether
Lagler was entitled to permanent-total-disability (PTD)
compensation. The Department issued a decision favorable to
Lagler on January 11, 2013. The Department admitted evidence
that the Social Security Administration found Lagler to be
"disabled as of April 10, 2011." The Department
also found that Lagler did not purposefully leave the Sioux
Falls job market and that given her physical impairment, age,
training, and experience, she would not be able to find
suitable, regular employment in Winner. Also finding that
Lagler is not a candidate for retraining, the Department
concluded she is permanently and totally disabled under the
odd-lot doctrine.[4] The Department entered factual findings
and legal conclusions on February 11, 2013.
[¶15.]
On December 2, 2014, the Department held a third hearing.
This hearing addressed the questions whether Lagler was
entitled to a lump-sum award and attorney's fees. At the
hearing, P.A. Majeres-the only person named "Angie"
in Dr. Watts's office who was also involved in
Lagler's care-testified but denied even knowing who
Lemieux was, let alone having told her that Lagler's
condition was unrelated to the April 2007 injury. Lemieux did
not testify at the hearing. Even so, finding that Lemieux
exercised "some diligence," the Department
concluded that although Zurich's decision to deny further
compensation was incorrect, it was not vexatious or without
reasonable cause. The Department issued a decision on April
29, 2015, granting Lagler's request for a lump-sum award
but denying her request for attorney's fees. The
Department issued factual findings and legal conclusions
reflecting its decision on June 4. And on June 29, the
Department entered a final order, incorporating the June 4
factual findings and legal conclusions. The Department
awarded Lagler $526, 768 in total.[5]
[¶16.]
On July 13, 2015, Menard and Zurich filed a notice of appeal
to the circuit court. They appealed the following: (1) the
Department's October 24, 2011 factual findings and legal
conclusions; (2) the Department's February 3, 2012 order;
(3)the Department's February 11, 2013 factual findings
and legal conclusions; (4)the Department's June 4, 2015
factual findings and legal conclusions; and (5) the
Department's June 29, 2015 order. In a statement of
issues filed the same day, Menard and Zurich challenged both
the award of compensation and the decision to award it as a
lump sum. Lagler did not file a notice of review, but on July
15, she did file a statement of issues that challenged the
Department's denial of her request for attorney's
fees.
[¶17.]
The circuit court heard the appeal on December 21, 2015. On
February 17, 2016, the court issued a decision affirming the
Department's decision regarding causation and
Lagler's entitlement to compensation. However, the court
reversed the Department's decision to award compensation
as a lump sum. The court also reversed the Department's
denial of attorney's fees. The court remanded the case
back to the Department with instructions to recalculate the
prejudgment interest due and to award Lagler reasonable
attorney's fees under SDCL 58-12-3.
[¶18.]
On remand, additional problems arose on both issues. The
parties reached an agreement regarding the amount of
prejudgment interest due. Despite the parties' agreement,
the Department deviated from the stipulated amount of $171,
919 and instead awarded $156, 691. And in the circuit
court's decision, the court noted that Lagler
"produced evidence of reasonableness of her
attorney's fees[, ]" which totaled $103, 632. The
court ordered those fees be reimbursed under SDCL 58-12-3,
but on remand, the Department instead awarded attorney's
fees under SDCL 62-7-36 in the amount of "30% of
disputed amounts ($66, 327.32) plus costs and sales
tax." The Department issued a final order on June 6,
2016.
[¶19.]
On June 17, 2016, Lagler filed a notice of appeal to the
circuit court.[6] She appealed the following: (1) the
Department's April 29, 2015 decision; (2) the
Department's June 4, 2015 factual findings, legal
conclusions, and order; (3) the Department's June 29,
2015 order; and (4) the Department's June 6, 2016 order.
In a statement of issues filed on June 21, 2016, Lagler
challenged the Department's calculation of prejudgment
interest and attorney's fees. And although the court had
already rejected Lagler's request for a lump-sum award in
the first appeal, Lagler challenged the Department's
denial of her request for a lump-sum award. Finally, Lagler
requested taxation of disbursements in the amount of $7, 443.
Menard and Zurich filed a notice of review and statement of
issues on July 6 addressing the issue of attorney's fees.
For the first time in the history of this
workers'-compensation case, Menard and Zurich argued that
because Lagler failed to file a notice of review in the first
appeal regarding the Department's initial denial of her
request for attorney's fees, neither the Department nor
the circuit court had jurisdiction over that matter after the
Department's initial decision.
[¶20.]
The circuit court considered the second appeal on October 4,
2016. The court rejected Menard and Zurich's
jurisdictional argument and reaffirmed its February 17, 2016
decision. The court affirmed the Department's denial of
Lagler's request for a lump-sum award. The court reversed
the Department's calculation of prejudgment interest and
attorney's fees. The court also denied Lagler's
request for taxable disbursements. Instead of remanding, the
court ordered Menard and Zurich to pay Lagler the amount
stipulated by the parties in regard to prejudgment interest.
The court also instructed the parties that it would resolve
the attorney's-fees issue either by agreement of the
parties or after further proceedings. On January 20, 2017,
Lagler submitted a motion to the circuit court that requested
attorney's fees. After a hearing on March 20, the court
issued an order on April 4 that awarded Lagler $144, 824 in
attorney's fees.[7]
[¶21.]
Now before this Court, Menard and Zurich appeal the circuit
court's April 4, 2017 order. By notice of review, Lagler
appeals the court's February 17, 2016 decision, its
January 11, 2017 decision, and its April 4, 2017 order. The
parties raise the following issues:
1. Whether the circuit court erred by affirming the
Department's decision to award Lagler
permanent-total-disability compensation.
2. Whether the circuit court erred by reversing the
Department's decision to deny Lagler's request for
attorney's fees.
3. Whether the circuit court erred by reversing the
Department's decision to award compensation to Lagler in
a lump sum.
4. Whether the circuit court erred by declining to tax
additional expenditures of Lagler's.
Standard
of Review
[¶22.]
The central issue in this appeal is the adjudication of
Lagler's right to workers' compensation, which
occurred in a formal setting. Therefore, this appeal is
governed by South Dakota's Administrative Procedures Act,
SDCL chapter 1-26. Questions of law are reviewed de novo.
Dakota Trailer Mfg., Inc. v. United Fire & Cas.
Co., 2015 S.D. 55, ¶ 11, 866 N.W.2d 545, 548.
Matters of reviewable discretion are reviewed for abuse. SDCL
1-26-36(6). The agency's factual findings are reviewed
under the clearly erroneous standard. SDCL 1-26-36(5). The
agency's decision may be affirmed or remanded but cannot
be reversed or modified absent a showing of prejudice. SDCL
1-26-36. The same rules apply on appeal to this Court.
See Dakota Trailer Mfg., 2015 S.D. 55, ¶ 11,
866 N.W.2d at 548.
Analysis
and Decision
[¶23.]
1. Whether the circuit court erred by affirming
the Department's decision to award Lagler
permanent-total-disability compensation.
[¶24.]
Menard and Zurich first argue Lagler is not entitled to PTD
compensation. They contend that Lagler failed to establish a
causal connection between her April 2007 injury and the need
for her second ankle surgery. They also contend that Lagler
purposefully left the Sioux Falls job market and that
consequently, PTD compensation is ...