Mediation: Maine's Supreme Court Says Mediated Agreement Is Res Judicata on Facts (Web)

In Hoglund v. Aaskov Plumbing & Heating, No. WCB-05-280, slip op. (Maine S.Ct. Apr. 26, 2006)(available at http://caselaw.lp.findlaw.com/data2/mainestatecases/06me42ho.pdf),

the Maine Supreme Court held that the terms of a mediated agreement in connection with a workers' compensation issue are binding on factual issues.

Identifying a strong state policy encouraging mediation use in order to "replace litigation whenever possible," the Court ruled that "mediated agreements are accorded the same res judicata effect and enforceability as a Board or judicial decree." Id. at 8 (citing Bureau v. Staffing Network Inc., 678 A.2d 583, 590 (Maine 1996).

Hoglund focused on a determination of incapacity for the purpose of paying workers' compensation benefits to a former employee. Original plaintiff Peter Hoglund was trained as a master plumber and worked as a union plumber throughout most of his career. In the mid-1990s, he began working for defendant Aaskov Plumbing and Heating.

In April 2001, Hoglund, nearly 60, injured his knee on the job. He continued to work for Aaskov, but was terminated a few months later in October 2001.

After his termination, Hoglund applied for unemployment and medical benefits, as well as for worker's compensation. Id. at 2.

In January 2002, Hoglund and Aaskov participated in a mediation to resolve a number of outstanding issues in connection with his termination, including the degree and period of his incapacity, lost wages, medical bills, and possibly, discrimination.

The parties reached an agreement--and pursuant to Title 39-A of the Maine statutes, on worker's compensation law--the mediator recorded the agreement terms. The signed mediation record stated: "The parties agree that the employee will be paid at a rate of total from 10-6-01 ongoing. The insurer will take an offset for all unemployment benefits. Medical bills and treatment will be paid as well."

In August 2003, Aaskov filed a notice that it planned to discontinue the benefits paid to Hoglund due to the fact that he was no longer incapacitated. In response, Hoglund filed a petition for review with the Workers' Compensation Board contesting Aaskov's actions.

Under Maine law, the employer could discontinue benefits if it could show that the employee's medical or economic circumstances changed between the time of the determination of incapacity and the present. Id. at 5.

The Hearing Officer at the Board found for 100% partial incapacity benefits. Id. at 5. The provision for 100% incapacity benefits may have been a tradeoff for something else--such as an agreement not to file suit for age discrimination or to pursue further judicial action. Regardless, it was an explicit agreement regarding payment.

Simply put, unless Aaskov could show that there was some significant improvement in Mr. Hoglund's knee pain since the January 2002, mediation, Aaskov would be required to continue to provide the same benefits regardless of whether Hoglund was truly incapacitated.

The Maine Supreme Court ruled that mediated agreement’s provision for 100% partial incapacity benefits was final and binding on the question of Hoglund's incapacity. Id. at 8.

The Court stated that Aaskov would be required to prove a change in circumstances in order to reduce or discontinue the benefits -- the same ruling that would have occurred if the Workers' Compensation Board made the determination itself. Id. at 1, 5.

In essence, the Court gave the terms of a privately negotiated mediated agreement the same effect and enforceability of a judicial or administrative determination. Consequently, the agreement was res judicata on the facts surrounding the question of Hoglund's incapacity, since his medical and economic circumstances did not change since the mediation. Id. at 10.

The rationale behind the decision was simple: "[T]o require de novo proof of the facts after the parties had foregone a hearing and participated in a process intended to finally resolve most disputes, would create a disincentive to settle. And while there are legitimate concerns about the preclusive effect of agreements that represent a compromise, these concerns can be addressed by careful drafting in the report of mediation." Id. at 9. 

--Eric Laufgraben, Associate, Dewey Ballantine LLP