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Most parties enter into a compromise and release agreement because it ensures an end to the uncertainties of litigation. In short, a compromise and release agreement offers “closure.” That is because a compromise and release agreement, entered into with approval by a workers’ compensation judge, is final. Right? The parties cannot go back and revisit the terms of the compromise and release agreement after a WCJ’s approval. Right? Not so fast. The Commonwealth Court of Pennsylvania issued a decision in North Penn Sanitation Inc. v. WCAB (Dillard), which now gives a WCJ the ability or “power” to set aside a compromise and release agreement, after approval, in limited situations. In North Penn Sanitation Inc., on Oct. 12, 1990, Gregory Dillard sustained a work-related injury during the course and scope of his employment, for which North Penn Sanitation Inc. accepted liability through the issuance of a notice of compensation payable and began paying the claimant workers’ compensation benefits at $419 per week. The claimant’s injury was described in the NCP as a “fractured skull, body contusions and lacerations.” The claimant, approximately nine years after his work injury, contacted the employer’s insurance company, the State Workers’ Insurance Fund, and inquired about settling his claim. After negations, during which the claimant proceeded pro se, the parties agreed upon the terms of a compromise and release agreement. The parties agreed that SWIF would pay the claimant the lump sum of $50,000 in exchange for the “full, final and complete settlement, compromise and release of any and all claims for disability and medical compensation, past, present and future.” In addition, the agreement noted the claimant’s work injury as a “fractured skull, body contusions and lacerations.” The employer, pursuant to the Workers’ Compensation Act, filed a petition for approval of a compromise and release agreement and a hearing was held before WCJ Harry C. Shayhorn at which the claimant still proceeded pro se. Shayhorn approved the agreement by order dated April 19, 1999, after finding that the claimant understood the “full legal significance and import of the agreement.” Typically, this is the conclusion of the case: The file is closed and both parties at least try to forget (and possibly forgive) the litigation. Of course, if that were the case in North Penn Sanitation Inc., this article would (predictably) finish with the period at the end of this sentence. It doesn’t. On April 26, 2001, the claimant, now represented by counsel, filed a petition to review/set aside the compromise and release agreement. In his review petition, the claimant requested a review of the agreement in order to include specific loss of use under � 306 of the act for bilateral blindness sustained as a result of his Oct. 12, 1990, work injury. In addition, the claimant alternatively sought to have the agreement set aside due to a material misstatement of fact on the basis that the claimant’s work-related blindness was not included in the description of his injury in the agreement. The bureau assigned the review petition to WCJ Thomas G. Devlin, who after a hearing during which testimony and documentary evidence were introduced, granted the petition and set aside the agreement. The claimant testified that he contacted SWIF to resolve his case because he needed the money; however, during the settlement negotiations he was not advised by the employer that he had the right to be represented by an attorney, that he might be entitled to a separate payment for his loss of vision, that he was giving up his legal right relating to his loss of vision, or that he was advised of the legal terms of the agreement prior to the April 19, 1999, hearing. Concerning the April 19 hearing before Shayhorn, the claimant testified as follows: He met with an attorney for SWIF immediately before the hearing on April 19, 1999, at which time he advised SWIF’s attorney that he could not see the document. The attorney told him where to sign and physically held his hand to the agreement. He testified that defense counsel, the claimant and his friend went over the document before the hearing (despite the fact that none of the contents of the agreement was read to him), and he did not testify or inform Shayhorn that he was blind because he thought everyone knew he was blind. During the proceedings before Devlin, the claimant also submitted the testimony of Dr. Kenneth Heist and internal memorandums from SWIF. Heist testified that he examined the claimant on Sept. 19, 2001, and concluded from his examination, as well as his review of the claimant’s medical records, that the blunt head trauma the claimant sustained on Oct. 12, 1990, caused his blindness and left him unable to read in 1999. SWIF’s internal memorandums issued in 1991 noted the claimant’s visual problems and related these problems to the claimant’s Oct. 12, 1990, work injury. Devlin found that the claimant is blind due to the work injury. Devlin also found that the claimant was legally blind on April 19, 1999, the date of the compromise and release hearing. As a result of his blindness, the claimant was unable to read the agreement, and, as no one read the agreement to him, he signed the agreement without knowing what the document said. Devlin further found that no one ever appraised Shayhorn that the claimant suffered bilateral blindness due to the work injury and that the only disclosure that defense counsel made to Shayhorn about the claimant’s vision was that the claimant “had some trouble seeing.” Defense counsel did not indicate, despite SWIF memos to the contrary, that this difficulty was related to the claimant’s work injury. Therefore, Devlin concluded that the agreement was based upon a material mistake of fact and ordered the employer to pay the claimant temporary total disability benefits as of April 19, 1999, at the weekly rate of $419 until the status of his disability changed under the act, with a credit for compensation paid pursuant to the agreement. Following the WCAB’s affirming Devlin’s decision, the employer appealed the matter to the Commonwealth Court. In its appeal, the employer contended that a WCJ lacks authority to set aside a compromise and release agreement once it has been approved by a WCJ. The Commonwealth Court disagreed with the employer and affirmed the decision of Devlin. In affirming the decision of Devlin, the Commonwealth Court examined � 449 of the act, 77 P.S. � 1000.5, which governs the compromise and release of workers’ compensation claims and noted that “once approved, a valid compromise and release is final, conclusive and binding upon the parties.” The Commonwealth Court further noted that, unlike other sections of the act wherein the general assembly gave the WCJ the express authority to set aside under certain provisions, � 449 does not provide for the setting aside of a compromise and release agreement. As � 449 does not have an express provision to set aside compromise and release agreements, the employer argued that the Legislature expressly intended that the WCJ not have the authority to set aside approved compromise and release agreements. While the Commonwealth Court noted the persuasive value of the employer’s argument, the Commonwealth Court stated the this argument failed to consider the “inherent powers” of the WCJ and, even though the General Assembly did not expressly authorize the WCJ to set aside a compromise and release, the “power to set aside has, by implication, been conferred upon the WCJ as necessarily incident to the exercise of the adjudicatory power expressly granted. It would be illogical to give a WCJ authority to approve a compromise and release but no authority to rescind his action.” The Commonwealth Court further stated that the “WCJ’s inherent power to set aside compromise and release agreements derives from and is comparable to that possessed by the courts. Prior to the enactment of the act, workers’ compensation claims were handled as common law tort actions.” Citing the rule that at common law, a compromise and release agreement can be set aside upon a clear showing of fraud, deception, duress or mutual mistake, the Commonwealth Court held that the test for setting aside releases at common law should be extended and applied to workers’ compensation cases. Therefore, after determining that a WCJ has the inherent power to set aside compromise and release agreements under narrow circumstances, the Commonwealth Court had to address whether Devlin erred or abused his discretion in setting aside the parties’ agreement on the basis of mistake. Acknowledging the fact that Pennsylvania courts have long held that underestimating damages or entering into a settlement before damages are adequately assessed is not a mutual mistake of fact. After examining the common law, the Commonwealth Court held that “in order for a mistake to constitute a basis for invalidating a compromise and release, the mistake must be a material one and in existence at the time the release was executed.” Applying its new test to the facts presented, the Commonwealth Court held that Devlin did not err in setting aside the agreement, as the claimant established the existence of a mutual mistake of present fact. Focusing upon the facts that the evidence established that the claimant’s bilateral blindness was caused by his Oct. 12, 1990, work injury, that the parties were aware of this injury before the settlement was negotiated, and that this injury was not included in the NCP or in the agreement or disclosed to Shayhorn, Shayhorn, being unaware of the claimant’s condition, could not ascertain whether the claimant understood the full legal significance of the agreement. The Commonwealth Court in setting aside the agreement also relied upon the long-standing principle that the act is remedial in nature and intended to be liberally construed in favor of an injured employee in order to effectuate its humanitarian purpose. Examining the facts of this case, the Commonwealth Court stated that the claimant was at a unique disadvantage given the nature of his injury and his inability to read the agreement, which was further compounded by the fact that the claimant decided to proceed in the proceeding before Shayhorn pro se. However, the Commonwealth Court in Footnote 3 did “caution” that people who are blind or illiterate “are not automatically excused from complying with the terms of a contract, release or agreement which they sign simply because their disability might have prevented them from reading the same. A person with such a disability must make a reasonable effort to have the document read to him.” Judge Bonnie Brigance Leadbetter filed a concurring opinion agreeing with the result reached by the majority but disagreeing that an approved compromise and release agreement that has become final may be set aside on the basis of mutual mistake. In reaching her conclusion, Leadbetter noted that a compromise and release agreement is effective only when approved in an order, based upon a specific finding that the claimant understood the full legal significance of his agreement, which follows a hearing disclosing all pertinent facts. She further stated that as the act specifically provided for the setting aside of certain agreements, i.e. final receipts and supplemental agreements, but not compromise and release agreements, which may only be challenged when the doctrines of issue and claim preclusion do not apply. Going back to the question posed in the beginning of this article regarding the finality of a compromise and release agreement, it appears that in the majority of situations it still would be an end to the claim. However, the Commonwealth Court has just given the green light to challenge and set aside a final compromise and release agreement in the instance of a clear showing of fraud, deception, duress or mutual mistake. As the claimant filed his review petition approximately two years after the agreement became final, the Commonwealth Court did not address whether the claimant must request that a compromise and release agreement be set aside within three years of its approval, which is the time period a claimant has under the act to set aside a final receipt, or if the time period to set aside a compromise and release agreement would be extended. Ultimately, the facts of this case just go to prove that a compromise (and release) is not truly fair unless it leaves everybody unhappy. At the time of this writing no petition for allowance of appeal had been filed with the Supreme Court. Deborah A. Beck is an associate with Sand & Saidel and the assistant chairwoman of its workers’ compensation department. She is also the 2004 defense co-chairwoman of the workers’ compensation section of the Philadelphia Bar Association. If you are interested in submitting an article to law.com, please click here for our submission guidelines.

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