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  • WisBar News
    July 25, 2013

    Supreme Court Reverses Court of Appeals in Worker’s Compensation Case

    July 25, 2013 – In the recently decided Xcel Energy Services Inc. v. Labor and Industry Review Commission and John Smoczyk, 2013 WI 64 (July 11, 2013), the Wisconsin Supreme Court reversed the Court of Appeals in a case involving a worker’s compensation benefits decision made by the Labor and Industry Review Commission (LIRC).

    LIRC awarded worker’s compensation benefits to John Smoczyk for a permanent total disability that resulted from an injury received while working at Xcel Energy Services Inc. (Xcel).

    Xcel raised several challenges, including that the court of appeals erred when it concluded the circuit court was required to dismiss Xcel’s complaint for lack of competency due to its failure to name its insurer, ACE American Insurance Co. (ACE), as an “adverse party” under Wis. Stat. section 102.23(1)(a). Xcel also raised two challenges to the merits of LIRC’s decision, claiming there was no credible and substantial evidence to support the finding of permanent total disability and that LIRC acted without authority when it awarded the disability benefits after an administrative law judge (ALJ) ordered further medical procedures were required.


    In January 2007, Smoczyk injured his back while employed by Xcel as an ironworker. After taking a short break to rest, he returned to work and finished his shift. After experiencing significant pain over the weekend, Smoczyk returned to work on Monday and notified his supervisor about his back injury.

    Smoczyk then went to see Dr. Jane Stark, who diagnosed Smoczyk with a back sprain/strain that she concluded could be reasonably related to his work activities. Smokczyk began undergoing physical therapy, but in late February 2007, believing that Dr. Stark’s recommendations were not in his best interest, he began treatment with Dr. Joseph Hebl.

    Dr. Hebl continued the physical therapy treatment recommendation and imposed light-duty restrictions. A short time later, Smoczyk was laid off as part of Xcel’s seasonal layoffs, but he was never rehired and has not worked since being laid off in February 2007.

    In May 2007, Smoczyk returned to Dr. Hebl, reporting his back pain had worsened. Over the next several months, Smoczyk reported varying pain levels for his back, as well as new pain radiating down both legs to his feet. On Dr. Hebl’s recommendation, Smoczyk visited the Pain Clinic of Northwestern Wisconsin in July 2007, where he met with Dr. Mark Schlimgen. Dr. Schlimgen recommended continued physical therapy and steroid injections to his lower back, which Smoczyk received.

    In September 2007, Dr. Hebl suggested Smoczyk apply for Social Security Disability benefits, as it was Hebl’s opinion Smoczyk would be unable to return to work or pursue any other gainful employment. At the request of Xcel, Smoczyk then met with an independent medical examiner, Dr. John Dowdle. Dr. Dowdle opined that the treatments Smoczyk had been receiving were “reasonable and necessary” and also suggested several other treatment options, including a medial branch block, and a subsequent procedure, a radiofrequency facet denervation. Dr. Dowdle also recommended work restrictions and assessed a 5 percent permanent partial disability rating.

    In October 2007, Smoczyk was deemed eligible for Social Security Disability benefits, and permanent partial disability benefits for five percent of the body as a whole and temporary total disability for the period between February and December 2007. Smoczyk continued to express reluctance to undergo additional procedures, based on his concern of exacerbating his pain.

    During the summer and fall of 2008, Smoczyk underwent two vocational assessments, one on his behalf conducted by Sidney Bauer, and the other on Xcel’s behalf, conducted by John Meltzer. Bauer concluded Smoczyk’s only potential occupational opportunities would be in the service industry, but that Smoczyk’s physical restrictions, his education, and the limited labor market resulted in Smoczyk being permanently and totally disabled under the “odd-lot” doctrine. Melzter concluded that Smoczyk would have a 60 to 70 percent decrease in earning capacity, but that with a diligent search, Smoczyk would be able to find light-duty employment in his home market, in positions such as sales clerk, hotel clerk, or security guard. [The “odd-lot” doctrine provides that “if a claimant makes a prima facie case that he or she was injured in an industrial accident and, because of injury, age, education, and capacity, is unable to secure continuing gainful employment, the burden of showing that the claimant is employable shifts to the employer.” Wis. Stat. § 102.44(6)(h).]

    In December 2008, the Worker’s Compensation Division of the Department of Workforce Development (DWD) heard Smoczyk’s worker’s compensation claim. The ALJ, Enemuoh-Trammell, concluded Smoczyk was entitled to temporary total disability benefits through February 2008, but declined to award any permanent partial disability beyond the 5 percent that Xcel had conceded based on Dr. Dowdle’s opinion. The ALJ also held that Smoczyk’s failure to pursue a medial branch blockade precluded a determination of permanent total disability. Shortly after this decision, Smoczyk again visited Dr. Hebl, who noted that the procedures referred to by the ALJ were no longer feasible, an opinion that Dr. Schlimgen affirmed.

    In August 2009, a second DWD hearing was held, before ALJ Mary Lynn Endter. Endter concluded that Smoczyk had a permanent partial disability of 60 percent, but that Smoczyk was not entitled to permanent total disability benefits. Smoczyk then filed a petition for review with LIRC. Upon review, LIRC concluded that based on the odd-lot doctrine, Smoczyk had made a prima facie case for permanent total disability. LIRC then held the burden shifted to Xcel to show there were jobs available for Smoczyk, but Xcel had failed to make such a showing.

    Xcel sought judicial review of LIRC’s decision in the Chippewa County Circuit Court. Xcel contended LIRC exceeded its authority because its conclusion was not supported by credible and substantial evidence in the record. LIRC contended the case should be dismissed because Wis. Stat. section 102.23(1)(a) required Xcel to name all adverse parties as defendants, and Xcel had failed to name its insurer ACE. The circuit court rejected LIRC’s competency argument, but affirmed LIRC’s order granting Smoczyk total disability benefits. Xcel filed a timely appeal.

    The court of appeals failed to reach the merits of LIRC’s decision, because it concluded that ACE was an “adverse party,” by relying on previous case law that stated that an “’adverse party’ … includes any party bound by [LIRC’s] order or award granting or denying compensation to the claimant.” Xcel then filed a petition for review with the supreme court.

    Clarifying “Adverse Party” Under Section 102.23(1)(a)

    Writing for the court, Justice Patience Drake Roggensack noted that compliance with Wis. Stat. section 102.23(1)(a)’s “adverse party” requirement is central to the statutory scheme of judicial review of LIRC’s worker’s compensation decisions. Failure to name an adverse party as a defendant deprives the circuit court of competency and requires dismissal of the complaint.

    The requirement of naming an adverse party as a defendant under Wis. Stat. section 102.23(1)(a) has long been interpreted to mean that the party seeking judicial review of LIRC’s decision must, in addition to naming LIRC, name the party “in whose favor” LIRC decided the case. An adverse party includes “every party whose interest in relation to the judgment or decree appealed from is in conflict with the modification or reversal sought by the appeal.”

    As a result of reaffirming this definition, Justice Roggensack noted, “we conclude that the court of appeals … erroneously expanded the meaning of the term ‘adverse party’ when it stated that … the term ‘includes any party bound by [LIRC’s] order or award granting or denying compensation to the claimant.’”

    As a result of declining to expand the definition that the court of appeals put forth, and reaffirming the supreme court’s longstanding definition, the supreme court found that Xcel’s insurer ACE was not an adverse party required to be named under the statute, and therefore ACE’s absence from Xcel’s complaint did not deprive the circuit court of competency to proceed on the merits.

    Analysis of LRIC’s Decision

    The supreme court, having determined that the circuit court had competency to decide Xcel’s complaint, turned to Xcel’s first argument that there was no credible and substantial evidence in the record to support LIRC’s decision.

    Noting that “the weight and credibility of the evidence are for the agency, not the reviewing court, to determine,” and also that the “burden of showing that LIRC’s decision was not supported by credible and substantial evidence is on the party seeking to set aside LIRC’s findings,” after reviewing the record, the supreme court found there was credible and substantial evidence to support LIRC’s finding that Smoczyk is permanently totally disabled under the odd-lot doctrine.

    Xcel’s second argument, that LIRC acted without authority, is related to its first argument, because when a decision by LIRC is not supported by credible and substantial evidence, the decision is in excess of LIRC’s authority. Xcel based its arguments on the ALJ’s findings, and argued LIRC’s decision was contrary to those findings.

    Justice Roggensack noted that “LIRC is not bound by the ALJ’s decision, and may affirm, reverse, set aside or modify the findings or order in whole or in part.” LIRC had express statutory authority over Smoczyk’s appeal from the second ALJ’s order denying permanent and total disability benefits.

    The supreme court therefore concluded that LIRC did not exceed its authority when it decided Smoczyk’s claim for permanent total disability without requiring him to undergo further medical procedures, and that this was proper under the statutes governing LIRC’s review. As a result, the court of appeal’s decision was reversed, and the cause remanded to the circuit court for further proceedings consistent with the supreme court’s opinion.

    Deborah Spanic is a legal writer for the State Bar of Wisconsin. 

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