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In a case of first impression with “far reaching consequences,” an en banc panel of the Commonwealth Court has ruled that a voluntary workers’ compensation settlement between an employee and an employer should not be set aside because the employee was mentally incompetent and didn’t understand what she was doing when she signed the agreement. The divided panel ruled Tuesday that the doctrine of collateral estoppel precluded a workers’ compensation judge from opening the settlement that ended the employee’s benefits to re-examine the employee’s competency. A “compensation compromise and release agreement” may be set aside only when the circumstances of the settlement involved “fraud, misrepresentation, concealment or a mutual mistake of fact,” the 5-2 majority explained. “Claimant’s alleged mental incapacity here does not constitute such a mutual mistake of fact,” Judge Ren�e L. Cohn wrote in Stiles v. Workers Compensation Appeal Board. Stiles had testified at a hearing before a workers’ compensation judge that she understood the “full legal significance” of the compromise and release agreement, in which Stiles traded her right to receive workers’ compensation benefits for a lump-sum payment of $100,000 or two-years’ salary, Cohn said. In 2000, Workers’ Compensation Judge Francis J. Desimone approved the agreement. A year later, Stiles — with a new lawyer — petitioned to have the agreement set aside, alleging that when she signed the settlement “she was suffering from severe psychological, psychiatric and physical injuries which gave her post-traumatic stress syndrome and [she] did not understand the economic value of her claim.” Stiles’ lawyer, Arthur Cohen, said, “If you saw that she got only two years’ of compensation, you’d recognize that something was wrong.” Stiles wanted the WCJ — this time Workers Compensation Judge Charles A. Getty — to open the agreement and reinstate her benefits, according to the Commonwealth Court opinion. Getty initially continued the matter so that Stiles could obtain the deposition of Stiles’ psychologist, but then he granted the employer’s motion to dismiss the petition. Concluding that a WCJ had already adjudicated the issue, the en banc Commonwealth Court this week held that the doctrine of collateral estoppel precluded another WCJ from re-examining the issue of whether Stiles actually understood the terms of the agreement. The panel’s decision affirmed Getty and the Worker’s Compensation Appeal Board. “Claimant’s mental competence was an issue actually litigated at the hearing before WCJ [Desimone],” Cohn wrote. “Based on this same reasoning, claimant’s mental competence was essential to the judgment approving the C&R agreement and material to the adjudication that did so.” Cohen said Wednesday that Stiles would file a petition to appeal the decision to the Supreme Court. “They didn’t allow us to prove her mental incapacity,” he said. “And they took away any opportunity to prove it.” Judge Rochelle S. Friedman, joined by Judge Doris A. Smith-Ribner, dissented in a separately written opinion, calling the result of the majority opinion “absurd and unjust.” “The majority invokes the doctrine of collateral estoppel to deny claimant the opportunity to prove that she was mentally incapable of understanding the C&R agreement and bases the decision solely on WCJ Desimone’s finding that claimant did understand that agreement,” Friedman wrote. By that holding, Friedman said, the majority eliminated the possibility of relief the Legislature intended to provide in the Workers’ Compensation Act. Indeed, because Stiles sought relief under the statute, she is required to prove the existence of a material mistake of fact or law, and “it makes no sense to hold that a claimant is prevented from offering such proof by the very ‘fact’ she has challenged,” Friedman wrote. “Because such reasoning leads only to absurd results, I cannot accept the majority’s analysis in this case.” While working for a state institution for mentally ill patients in 1995, Stiles was attacked in her office one night and hit over the head with a hammer, said Cohen, who worked on the case with his Cohen, Axinn & Cohen colleague David M. Axinn in Hollidaysburg, Pa. Stiles was diagnosed with post-concussion syndrome and post-traumatic stress disorder, according to the opinion. Laverne M. Kovacs, of Pennsylvania-based Serbin, Kovacs & Nypaver, represented Stiles’ employer, the Pennsylvania Department of Public Welfare. Kovacs said she questioned Stiles at the hearing before a worker’s compensation judge where the parties had presented their settlement for approval. Stiles directly answered Kovacs without confusion or hesitation, she said. “She clearly and specifically said she understood the document,” Kovacs said. “She said it had been explained to her by her attorney. It was explained paragraph by paragraph.” Kovacs said she also specifically questioned Stiles about the medication she was taking for her head injury, and Stiles stated that the drugs didn’t interfere with her ability to understand the documents or what she was doing. “The workers’ compensation judge makes the decision as to whether the claimant understands the agreement,” Kovacs said. “The doctrine of collateral estoppel precluded the judge from making that decision again.” In Cohn’s majority decision, she distinguished Stiles from a Commonwealth Court decision published May 10, North Penn Sanitation Inc. v. Workers’ Compensation Appeal Board. That opinion stated: “At common law, a compromise and release agreement can be set aside upon a clear showing of fraud, deception, duress or mutual mistake … We see no reason why the test for setting aside releases at common law should not be applied to workers’ compensation cases.” In North Penn, the court said that a mutual mistake –the insurance company’s attorney and the workers’ compensation judge both not knowing about the claimant’s work-related blindness — constituted a basis for invalidating a compromise and release agreement. But because there was no mutual mistake or other deception in Stiles, the majority said the agreement couldn’t be invalidated. In her dissent, Friedman called the distinction between the two cases unfounded and its conclusion premature. “Like claimant here, the claimant in [North Penn] testified that he understood the terms of the C&R agreement, and the WCJ made a finding to that effect; however, unlike claimant here, he was afforded an opportunity to present evidence in support of his claim that this finding was a mistake,” Friedman wrote. She said she would have vacated the appeal board’s order and remanded the case for an evidentiary hearing on Stiles’ petition.

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