Wetch v. Crum & Forster Commerical Ins et al

Filing 167

ORDER denying 59 Motion for Partial Summary Judgment; adopting in part, rejecting in part and modifying in part 131 Report and Recommendation; sustaining in part and overruling in part 136 Objection to Report and Recommendation; sustaining in part and overruling in part 137 Objection to Report and Recommendation. Signed by U.S. District Judge Jeffrey L. Viken on 2/25/20. (SB)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
CIV. 17-5033-JLV

DAVID WETCH,
Plaintiff,

ORDER

vs.
CRUM & FORSTER COMMERCIAL
INS.; NORTH RIVER INSURANCE
COMPANY; and UNITED STATES FIRE
INSURANCE COMPANY,
Defendants.

INTRODUCTION
United States Magistrate Judge Veronica L. Duffy filed a report and
recommendation (“R&R”). (Docket 131). Both parties filed objections to the
R&R. (Dockets 136 & 137). Both parties also filed responses to the opposing
party’s objections. (Dockets 143 & 144).
For the reasons given below, defendants’ objections are sustained in part
and overruled in part and plaintiff’s objections are sustained in part and
overruled in part. The court adopts in part, rejects in part and modifies in
part the R&R consistent with this order.
ANALYSIS

Defendants’ objections to the R&R are summarized as follows:
1.

The R&R erroneously concluded, based on Dr. Wojciehoski’s
opinion, that the defendants “ ‘acted contrary’ to pre-Hayes1
law.” (Docket 136 at pp. 2-3).

1Hayes

v. Rosenbaum Signs & Outdoor Advertising, Inc., and Acuity,
853 N.W.2d 878 (S.D. 2014).

2.

The R&R erroneously concluded the statute of limitations
was not debatable at the time of defendants’ “decision to
delay or deny medical benefits.” Id. at pp. 3-4.

3.

The R&R erroneously fails to acknowledge the rebuttable
presumption of SDCL § 62-4-1 is a question of fact. Id. at
pp. 4-5.

4.

The R&R erroneously fails to acknowledge that the
materiality issue is a question of fact. Id. at pp. 5-6.

5.

The R&R “unfairly minimizes” defendants’ assertions
regarding plaintiff’s claim for hydrotherapy expenses and its
effect on the question of bad faith. Id. at pp. 6-7.

Plaintiff’s objections to the R&R are summarized as follows:
1.

The R&R misinterpreted the stipulated agreement. (Docket
137 at pp. 1-7).

2.

The R&R misinterpreted South Dakota’s worker’s
compensation procedure. Id. at pp. 7-12.

3.

The R&R “errs in its analysis of the ‘retroactive effect’ of
Hayes.” Id. at pp. 12-14.

4.

The R&R misinterpreted the defendants’ denial letter. Id. at
pp. 14-15.

5.

The R&R “errs by considering [defendants’] arguments that
reject the rulings of the DOL2 and the Circuit Court.3” Id.
at pp. 15-17.

2The

South Dakota Department of Labor, Division of Labor and
Management (“DOL”).
3The

Seventh Judicial Circuit Court, Pennington County, South Dakota
(“Circuit Court”).
2

6.

The R&R “errs by failing to distinguish between the [DOL’s]
orders’ ‘effectiveness,’ ‘appealability,’ and ‘finality.’ ” Id. at
pp. 17-22.

7.

The R&R “errs by failing to consider the preclusive effect of
res judicata and collateral estoppel as they relate to the
Order of Contempt.” Id. at pp. 22-23.

8.

The R&R “errs by failing to apply judicial estoppel to the
Defendants’ representations before the DOL on the fourth
Motion for Partial Summary Judgment.” Id. at pp. 23-24
(emphasis omitted).

9.

The R&R “errs by failing to apply res judicata, collateral
estoppel, or judicial estoppel to the decisions and payments
of the Subsequent Injury Fund.” Id. at pp. 24-26.

10.

The R&R “makes clearly erroneous findings of fact relating to
Dr. Goodhope’s opinions.” Id. at pp. 26-27.

11.

The R&R misinterpreted and misapplied the January 28,
2016, Order. Id. at pp. 27-28.

12.

The R&R fails to evaluate the defendants’ denials of benefits
“given the facts and law available to the Defendants ‘at the
time’ of the denial, delay, or failure to process or pay.” Id. at
pp. 28-29.

13.

The R&R misinterpreted and misapplied plaintiff’s Due
Process Clause arguments. Id. at pp. 29-31.

14.

The R&R “errs in its analysis of Herr v. Dakotah, Inc.4” Id.
at pp. 31-32.

15.

The R&R “fails to consider the legal implications of
Defendants’ Motion to Dismiss the proceedings before the
Circuit Court.” Id. at p. 32.

4Herr

v. Dakotah, Inc., 613 N.W.2d 549 (S.D. 2000).
3

Under the Federal Magistrate Act, 28 U.S.C. § 636(b)(1), if a party files
written objections to the magistrate judge’s proposed findings and
recommendations, the district court is required to “make a de novo
determination of those portions of the report or specified proposed findings or
recommendations to which objection is made.” Id. The court may “accept,
reject, or modify, in whole or in part, the findings or recommendations made by
the magistrate judge.” Id. Fed. R. Civ. P. 72 further clarifies the court’s role
when objections are made to a R&R. “The district court may accept, reject, or
modify the recommended disposition; receive further evidence; or return the
matter to the magistrate judge with instructions.” Fed. R. Civ. P. 72(b)(3).
The court will resolve the parties’ objections in the manner deemed most
efficient.5
SOUTH DAKOTA WORKERS’ COMPENSATION
The R&R summarized the format by which workers’ compensation claims
are presented, resolved and finalized.6 (Docket 131 at pp. 22-27). However,
the court finds it is necessary for the clarity of this order to revisit the South
Dakota’s workers’ compensation system. Because plaintiff’s claims address

5In

the heading for each objection, the court will omit the quotation
marks, brackets and citations to the record.
6While

different entities refer to “workers’ compensation” or “worker’s
compensation” the court will refer to the singular, “worker’s compensation”
when discussing Mr. Wetch’s case.
4

his entitlement to medical benefits, the court will focus on those specific
benefits without intending to minimize or diminish the benefits for a
permanent, total disability claim.7
An employee who suffers a work-related injury is entitled to be provided
by the insurer with the “necessary first aid, medical, surgical, and hospital
services, or other suitable and proper care including medical and surgical
supplies, apparatus, artificial members, and body aids during the disability or
treatment of an employee within the provisions of [Title 62].” SDCL § 624-1. That section further provided at the time of Mr. Wetch’s original injury
that “[i]f an injured employee has not required medical treatment for a period of
three years, it is presumed that no further medical care with respect to the
injury is necessary.” Kester v. Colonial Manor of Custer, 571 N.W.2d 376, 384
(S.D. 1997) (citing SDCL § 62-4-1) abrogated on other grounds, Holscher v.
Valley Queen Cheese Factory, 713 N.W.2d 555 (S.D. 2006). “It is important to
note, however, that SDCL 62-4-1 allows an employee to rebut the presumption
by two methods: ‘Documentation that the injury is work related by the primary
treating or rating physician after three years shall automatically rebut the

7Even

though South Dakota’s statutory plan may identify either an
“employer” and an “insurer” or both, the court will address the worker’s
compensation obligations of the employer and insurance carrier by referencing
only the “insurer” from this point forward in this order.
5

presumption. . . . [T]he claimant may [also] present other medical proof to
rebut the presumption.’ ” Id.
“It is in the doctor’s province to determine what is necessary or suitable
and proper. When a disagreement arises as to the treatment rendered or
recommended by the physician, it is for the employer to show that the treatment
was not necessary or suitable and proper.” Streeter v. Canton School District,
677 N.W.2d 221, 226 (S.D. 2004) (emphasis in original) (citing Krier v. John
Morrell & Co., 473 N.W.2d 496, 498 (S.D. 1991)). See also Hanson v. Penrod
Construction Co., 425 N.W.2d 396, 399 (S.D. 1988).8 An insurer may require
an employee to undergo an examination by a qualified medical practitioner or
specialist at the insurer’s expense (“IME”). SDCL § 62-7-1.
If the employee and insurer reach an agreement as to compensation, the
agreement shall be filed with the DOL. SDCL § 62-7-5. If the DOL approves
the agreement, either affirmatively or by inaction, the agreement “is enforceable
for all purposes under the provisions of [Title 62].” Id. In addition, “after
expiration of the time for a petition for review or appeal,” any party to the
agreement may present the agreement to “the circuit court . . . in which the
injury occurred.” SDCL § 62-7-31. The circuit court “shall render a
judgment in accordance with the [agreement] . . . .” Id. “The judgment shall

8“[Hanson]

unequivocally establishes that the Employer has the burden
to demonstrate that the treatment rendered by the treating physician was not
necessary or suitable and proper.” Krier, 473 N.W.2d at 498.
6

have the same effect and in all proceedings in relation thereto be the same as
though rendered in an action duly heard and determined by the court except
that no appeal may be made on questions of fact.” Id.
In the event of contested matters, DOL shall hold a hearing on the
record. SDCL § 62-7-13. After the conclusion of the hearing, an
administrative law judge (“ALJ”) is required to “file its decision, its findings of
fact, and conclusions of law and shall serve” the decision on the parties and
their attorneys. Id.
“[W]ithin ten days after service on the party of a decision of the
department . . . [a party may] file with the department a petition for review of
the decision.” SDCL § 62-7-16. In the event a petition for review is filed, the
ALJ’s decision “may not be deemed that the department has made a final
decision until there is a final determination on the petition. The final
determination shall in that event be deemed the final decision of the
department and subject to appeal.” SDCL § 62-7-18. A party has only
30 days within which to appeal a final decision of the DOL to circuit court.
SDCL § 1-26-31.
As an alternative to review by the Secretary of the DOL, “[a]ny party may
elect to treat as final the decision of the department made as provided in
§ 62-7-13 and appeal therefrom without making any petition for review, in
which event the decision provided for in § 62-7-13 shall be treated as the final
decision of the department and subject to appeal.” SDCL § 62-7-17. Thus,
7

an ALJ’s decision under § 62-7-13 which is appealed directly to circuit court
constitutes a “final decision of the department.” Id. In similar fashion, a
direct appeal to circuit court must be made within 30 days of the ALJ’s
departmental decision. SDCL § 62-7-19 (referencing SDCL Chap.1-26).
Whether by petition for review after a departmental final decision has
been entered or by direct appeal from a § 62-7-13 final decision, upon appeal
the circuit court is authorized to review “all intermediate orders or decisions
affecting substantial rights[.]” SDCL § 62-7-19. Once the circuit court has
issued a decision, an appeal to the South Dakota Supreme Court “must be
taken within thirty days after the judgment or order shall be signed, attested,
filed and written notice of entry thereof shall have been given to the adverse
party.” SDCL § 15-26A-6.
Material to Mr. Wetch’s case, the South Dakota Supreme Court has
“consistently held that the law in effect at the time the employee is injured is
what controls the rights and duties of the parties in workers’ compensation
cases.” Sopko v. C & R Transfer Co., Inc., 665 N.W.2d 94, 97 (S.D. 2003)
(“Sopko II”) (internal references omitted). At the time of his 1991 injury, the
workers’ compensation statute SDCL § 62-7-33, which contemplated the review
of medical payments stated:
Any payment, including medical payments under § 62-4-1, made or
to be made under this title may be reviewed by the department
pursuant to § 62-7-12 at the written request of the employer or of
the employee and on such review payments may be ended,
diminished, increased or awarded subject to the maximum or
8

minimum amounts provided for in this title, if the department finds
that a change in the condition of the employee warrants such action.
Mills v. Spink Electric Cooperative, 442 N.W.2d 243, 245 n.2 (S.D. 1989) (citing
SDCL § 62-7-33 as amended in 1980; underlining and strike-over omitted).
See also Sopko v. C & R Transfer Co., Inc., 575 N.W.2d 225, 230 (S.D. 1998)
(“Sopko I”) (the only change noted was to add “of labor” after department on the
second line above). The magistrate judge noted the differences “between 1991
and the present version of the statute are not material [to Mr. Wetch’s case].”9
(Docket 131 at p. 33). “Under this statute, the Department has continuing
jurisdiction to review ‘any payment’ when there has been a physical change in
the employee’s condition from that of the last award.” Sopko I, 575 N.W.2d at
230.
SOUTH DAKOTA BAD FAITH CLAIMS
“Because the relationship between a workers’ compensation claimant
and an insurer is adversarial and not contractual . . . an action alleging bad
faith requires more than an allegation of wrongful conduct.” Mordhorst v.

9SDCL

§ 62-7-33 now states: “Any payment, including medical payments
under § 62-4-1, and disability payments under § 62-4-3 if the earnings have
substantially changed since the date of injury, made or to be made under this
title may be reviewed by the Department of Labor and Regulation pursuant to §
62-7-12 at the written request of the employer or of the employee and on such
review payments may be ended, diminished, increased, or awarded subject to
the maximum or minimum amounts provided for in this title, if the department
finds that a change in the condition of the employee warrants such action.
Any case in which there has been a determination of permanent total disability
may be reviewed by the department not less than every five years.”
9

Dakota Truck Underwriters & Risk Administration Services, 886 N.W.2d 322,
324 (S.D. 2016) (internal quotation marks and brackets omitted). “In South
Dakota . . . a claimant must prove two things to be successful: (1) an absence
of a reasonable basis for denial of policy benefits, and (2) the insurer’s
knowledge of the lack of a reasonable basis for denial.” Id. (internal quotation
marks, ellipsis and brackets omitted).10
A South Dakota bad faith action on an insurer’s decision “is determined
based upon the facts and law available to the insurer at the time it made the
decision to deny coverage.” Dakota, Minnesota & E. R.R. Corp. v. Acuity, 771
N.W.2d 623, 629 (S.D. 2009) (brackets omitted). “The appropriate inquiry for
the . . . court in determining the relevance of [post-litigation decisions and
conduct of the insurer] is whether the insurer’s post-filing conduct sheds light
on the reasonableness of the insurer’s decision or conduct in denying [or
delaying] insurance benefits.” Id. at 635. “[T]he relevant inquiry . . . is the
insurer’s decision and actions at the time it made the decision to deny [or
delay] coverage.” Id. (internal quotation marks and citation omitted). “If the
focus of a bad faith claim is the insurer’s knowledge and belief during the time
the claim is being reviewed[,] then the relevance of the litigation conduct is

10Earlier

South Dakota cases “omit the words the lack of from the
language of the second prong. . . . [W]e take this opportunity to correct our own
rule statement going forward.” Mordhorst, 886 N.W.2d at 324 n.1. (italics in
original).
10

severely diminished.” Id. at 635-36 (internal quotation marks, brackets and
citation omitted).
FACTS OF THE CASE
Neither party objected to the vast majority of the statement of facts in the
R&R. (Docket 131 at pp. 2-18). Defendants’ only factual objection appears to
be associated with their fifth objection stated above. (Docket 136 at pp. 6-7).
Plaintiff’s only factual objection is associated with his tenth objection stated
above. (Docket 137 at pp. 26-27). Those factual objections will be addressed
later in this order. Subject only to those objections, the court adopts the facts
stated in the R&R.
RESOLUTION OF THE PARTIES’ OBJECTIONS
1.

Plaintiff’s first objection contends the R&R misinterpreted the
stipulated agreement.
Plaintiff argues the R&R erred “by allowing the Defendants to argue that

they had the authority to unilaterally disapprove treatment, contrary to
Hanson. . . [And] by failing to apply [the] fundamental principles of medical
benefits in workers’ compensation, by reading the Stipulated Agreement to not
recognize Wetch’s rights to these benefits in the future.” (Docket 137 at p. 3)
(emphasis omitted; referencing Docket 131 at pp. 3-4, 43 & 48). Plaintiff
submits “[t]hese statements are plain legal error, given the workers’
compensation standards[.]” Id. at p. 5.

11

Plaintiff further argues the R&R “fails to apply res judicata to the SDCL
62-4-1 duties reflected in the Stipulated Agreement.” Id. at p. 6 (referencing
Docket 131 at pp. 38-44).11 Plaintiff submits the R&R “rejects 62-4-1,
Hanson, Cozine,12 and Stuckey13” when it stated, “the Stipulation Agreement
. . . ‘does not affirmatively provide for [plaintiff’s] right to those expenses
incurred post-stipulation.’ ” (Docket 137 at p. 7) (emphasis omitted;
referencing Docket 131 at p. 42).
The stipulated agreement provided, among other things: “Nothing in this
Agreement impairs Claimant’s entitlements under SDCL 62-4-1.” (Docket 441 at p. 3 ¶ 9). The agreement went on to declare it was intended to be “full
payment of any and all of the following benefits now due or hereafter accruing
to Claimant under the South Dakota worker’s compensation law[.] Id. ¶ 10.
The agreement described those satisfied benefits to be:
(a)

All compensation due to past, present, or future temporary
total disability under SDCL 62-4-3;

(b)

All compensation for partial disability already existing or
hereafter accruing to the Claimant under SDCL 62-4-5 and
SDCL 62-4-6;

11Mr.

Wetch asserts the R&R “continues this error in the discussion of
the 2016 judgment of the circuit court.” (Docket 137 at pp. 6-7) (referencing
Docket 131 at p. 42). This objection and challenge to the R&R will be resolved
in the court’s analysis of plaintiff’s eleventh objection.
12Cozine

v. Midwest Coast Transport, Inc., 454 N.W.2d 548 (S.D. 1990).

13Stuckey

v. Sturgis Pizza Ranch, 793 N.W.2d 378 (S.D. 2011).
12

(c)

Any and all compensation which might be due to Claimant for
periods of rehabilitation under SDCL 62-4-5.1;

(d)

Any compensation now due or to which Claimant may
hereafter acquire rights for permanent total disability or death
under SDCL 62-4-7 and SDCL 62-4-8;

(e)

Any compensation, past, present, or future to which Claimant
might be due for loss of employability, loss of use, or Cozine
under applicable law; and

(f)

To have this matter reopened at Claimant’s request pursuant
to SDCL 62-7-33 for the benefits described in paragraphs (a),
(b), (c), (d) and (e), reserving and excepting of those benefits
allowable pursuant to SDCL 62-4-1 as provided in paragraph
9 hereof.

Id.
The R&R said the stipulated agreement “did not provide for payment of
medical expenses, but instead provided Mr. Wetch’s entitlement to pursue
payment of such expenses from defendants in the future was not impaired by
the stipulation.” (Docket 131 at pp. 3-4). The court interprets plaintiff’s
objection to mean the R&R should say “under the agreement Mr. Wetch was
entitled to medical payments from defendants in the future,” leaving out the
double negative of the remainder of the statement in the R&R.
The court believes the R&R intended to convey the stipulated agreement
entitled Mr. Wetch to future payments of medical expenses from the
defendants. What exactly those future payments may be is not delineated in
the stipulated agreement, but entitlement to those payments is outlined in
South Dakota’s workers’ compensation statutes. The choice of language in
¶ 9 and ¶ 10(f) of the agreement was intended to preserve Mr. Wetch’s benefits,
“entitlements” to future medical care under SDCL § 62-4-1. (Docket 44-1
13

p. 3 ¶ 9). The use of the double negative in the R&R does not mean the
magistrate judge failed to properly interpret or apply the stipulated agreement.
The court reaches the same conclusion as to the objected-to-statements at
pages 43 and 48 of the R&R. (Docket 137 at p. 3).
The magistrate judge properly observed “res judicate can apply to DOL
decisions but those decisions must be final agency decisions.” (Docket 131 at
p. 38) (referencing Jundt v. Fuller, 736 N.W.2d 508, 513 (S.D. 2007) (“An
unappealed administrative decision becomes final and should be accorded res
judicata effect.”). The magistrate judge “decline[d] to apply res judicata in
service of Mr. Wetch’s partial summary judgment motion. The 1994
stipulation is final but does not affirmatively dispose of the issue of poststipulation medical benefits . . . .” (Docket 131 at p. 43).
The magistrate judge’s discussion of the potential application of res
judicata to the stipulated agreement does not ignore the function of SDCL
§ 62-4-1 or the authority of Hanson,14 Cozine15 or Stuckey.16 The court finds
the magistrate judge’s analysis of the stipulated agreement and its relationship
to the other issues before the court in this case is an accurate examination of

14See

footnote 8 supra.

15Cozine

reiterated the obligation imposed on an employer under SDCL
§ 62-4-1. “[Employer] knew Cozine needed additional treatment . . . yet the
company failed to properly provide that treatment.” Cozine, 454 N.W.2d at
555. “SDCL 62-4-1 places an affirmative duty upon the employer to provide
necessary medical care to an injured employee.” Id.
16Stuckey

is discussed in detail later in this order.
14

what was and what was not final for purposes of bad faith consideration. The
purpose and authority of the stipulated agreement is unquestioned, but its
ultimate impact lies in the resolution of the other issues raised in the R&R.
Plaintiff’s first objection to the R&R is overruled.
2.

Plaintiff’s fourth objection contends the R&R misinterpreted the
defendants’ denial letter.
In his fourth objection Mr. Wetch claims the R&R “misreads the breadth

of the denial letter, which goes beyond seeking a reduction of only four items of
care. . . . [The denial letter] was not simply a reduction of four discrete items of
care: Defendants claimed a reduction of 50% of all compensable benefits.”
(Docket 137 at p. 14) (referencing Dockets 131 at p. 6 & 44-3).
Following the IME by Dr. Wojciehoski, defendants’ April 5, 2012, letter to
Mr. Wetch stated “we will pay the fifty percent of the items noted below. . . .
Please note we will pay fifty percent of what is considered medically reasonable
and necessary, however, anything in excess will be your responsibility. . . . As
you obtain the items above please send the case receipt to [the claims
examiner] so [the insurer] can reimburse you the fifty percent we owe.”
(Docket 44-3 at p. 2).
The R&R summarized the letter in this manner: “Following receipt of
Dr. Wojciehoski’s opinion, defendants notified Mr. Wetch they would pay 50%
of the cost of each of the four items found to be necessary and related to the
work injury (Soma, a walker, a pull bar, and a lift chair).” (Docket 131 at p. 6)
15

(referencing Docket No. 44-3). Mr. Wetch claims the magistrate judge
misinterpreted defendants’ letter because “they were seeking to relitigate the
issue of the contribution of cerebral palsy, which had been known prior to the
Stipulated Agreement.” (Docket 137 at pp. 14-15) (emphasis omitted).
There is no evidence in the record defendants’ letter or their action after
April 2012 supports Mr. Wetch’s fear of a back-door challenge to
reimbursement for all future medical expenses. Were defendants to take that
position in the future, plaintiff would be able to challenge that conduct on the
basis of res judicata or collateral estoppel. Kermmoade v. Quality Inn, 612
N.W.2d 583, 589 (S.D. 2000) (“We have often stated that once an agreement is
accepted under the statute, the parties are bound to it.”) (referencing SDCL 627-5; Larsen v. Sioux Falls School District, 509 N.W.2d 703, 708 (S.D. 1993);
Whitney v. AGSCO Dakota, 453 N.W.2d 847, 850 (S.D. 1990); Call v.
Benevolent & Protective Order of Elks, 307 N.W.2d 138, 139 (S.D. 1981).
Plaintiff’s fourth objection is overruled.
3.

Defendants’ second objection asserts the R&R erroneously
concluded the statute of limitations was not debatable at the time
of defendants’ decision to delay or deny medical benefits.
The R&R rejected defendants’ argument the three-year statute of

limitations enacted in 1995, SDCL § 62-7-35.1, “bars Mr. Wetch’s further claim
for benefits and provides a reasonable basis for defendants’ denial and delay of
benefits.” (Docket 131 at p. 52). The R&R identified four reasons for this
conclusion. First, § 62-7-35.1 was enacted “4 years after Mr. Wetch’s injury.”
16

Id. Second, “[t]he South Dakota Supreme Court previously determined that
another statute of limitations applicable to workers compensation should not
apply retroactively.” Id. at p. 53 (citing West v. John Morrell & Co., 460
N.W.2d 745, 747 (S.D. 1990) (“The amendment of SDCL 62-7-35 had a definite
effect upon Morrell’s substantive rights in this case and cannot be retroactively
applied[.]”). Third, “[w]hen § 62-7-35.1 was enacted in 1995, it provided an
entirely new ‘back stop’ to a claim. . . . If the matter lies inactive for 3 or more
years without the employee filing a petition with the DOL, this statute bars
consideration of the petition.” Id. at p. 55 (referencing Faircloth v. Raven
Industries, Inc., 620 N.W.2d 198, 201 (S.D. 2000) (“SDCL 62-7-35.1 furnishes
the limitations period when the employer provides the employee with benefits
for a period of time, gives no denial notice, and then the matter lies
inactive.”).17 Fourth, Hyatt v. Harvest States Co-op., 621 N.W.2d 369 (S.D.
2001) “provides additional authority for the conclusion the statute of

17In

1995 the Faircloth court pointed out SDCL § 62-7-35.1 further
provided: “However, the time limitation of this section does not apply to claims
for medical care or the replacement of medicine, crutches, ambulatory devices,
artificial limbs, eyeglasses, contact lenses, hearing aids, and other apparatus,
which medical care or apparatus are permanently or indefinitely required as
the result of a compensable injury. The provision of such medical care or
replacement of such items does not constitute payment of compensation so as
to toll the running of the statute of limitations.” Faircloth, 620 N.W.2d at
p. 201 n.2 (referencing SDCL 62-7-35.1 (1996 Supp.)). This exception was
removed by the South Dakota Legislature in 1999. See South Dakota Session
Laws, 1999, Chapter 261, Section 11, at https://sdlegislature.gov/sessions/
1999/sesslaws/ch261.htm (last visited August 23, 2019).
17

limitations does not provide a reasonable basis for defendants’ actions.” Id. at
p. 55 n.16. The Hyatt court held: “We adopt the majority view that in the
context of a commuted lump-sum payment, any applicable statutory
limitations for further compensation or modification of the award begins to run
from the date when the ‘last payment’ would have been made had the award
been paid in installments.” Hyatt, 621 N.W.2d at 371.
Defendants’ second objection to the R&R is overruled.18
4.

Defendants’ fourth objection asserts the R&R erroneously fails to
acknowledge that the materiality issue is a question of fact.
The R&R rejected defendants’ materiality claim. (Docket 131 at p. 38).

Defendants claim “[t]he disputed amount of $1,752.56 relates to a partial
denial of reimbursement on four small items that Wetch did receive and was
never wanting in terms of treatment.” (Docket 136 at pp. 5-6) (emphasis
omitted). Because these items are insignificant in comparison to what
defendants have paid, they argue plaintiff’s bad faith claim should not be
allowed to proceed to trial. Id. Plaintiff asserts defendants’ objection is
disingenuous because the DOL found “Defendants failed to provide far more
ordered care than four items.” (Docket 143 at p. 5) (emphasis omitted)
(referencing Dockets 44-17 through 44-20).

18Defendants’

assertion of a reservation of “its right to present evidence
and argue at minimum the statute of limitations was fairly debatable at the
time of its decision to delay or deny medical benefits,” (Docket 136 at p. 4), is
denied.
18

When granting Mr. Wetch’s third motion for summary judgment in
November 2016, the DOL recalled that in January 2016 it ordered defendants
“to provide a case manager, wheelchair, vehicle with hand controls, supervised
living accommodations, and other home care service. . . . [A]nd none of the
items or services recommended in [the Form 485 life-care plan] have been
implemented.” (Docket 44-17 at p. 3 ¶ 4; referencing Docket 44-16 at
p. 5). While defendants wish to limit their exposure to $1,752.56, the record
clearly shows plaintiff’s unpaid claims as of January 2016 were in the realm of
tens of thousands of dollars.
Defendants’ effort to defeat plaintiff’s partial summary judgment claim
based on a lack of materiality does not create a genuine issue of material fact.
Defendants fail to point the court to “any South Dakota case rejecting a bad
faith case out of hand because the benefits withheld by the insurer paled in
comparison to the benefits paid out.” (Docket 131 at p. 38). The court adopts
this conclusion in the R&R.
Defendants’ fourth objection to the R&R is overruled.
5.

Defendants’ fifth objection contends the R&R unfairly minimizes
defendants’ assertions regarding plaintiff’s claim for hydrotherapy
expenses and its effect on the question of bad faith.
The R&R noted:
Defendants point out that Dr. Goodhope was no longer prescribing
hydrotherapy at the time Mr. Wetch filed his third motion for partial
summary judgment with the DOL asking the DOL to require
defendants to pay for hydrotherapy. Defendants characterize this
as intentional fraud. However, the only proof of this assertion is
19

that in a laundry list of prescribed items written by Dr. Goodhope,
the item “hydrotherapy” is no longer on the list. That is weak
evidence for impugning a fellow lawyer with the allegation of
intentional fraud.
(Docket 131 at p. 15 n.9). Defendants’ objection challenges this comment
because “Wetch now admits his claim to the Department was false . . . [and]
[t]he undisputed evidence reveals Wetch’s claim was entirely contrived.”
(Docket 136 at p. 6). Defendants’ citations to the record do not support their
assertions.
The portions of Dr. Goodhope’s deposition and Exhibit 17 which are the
subject of defendants’ objection do not indicate the doctor never prescribed
hydrotherapy. See Docket 99-4 at pp. 84:4-85:23 and p. 41 (Exhibit 17). The
list of referrals were simply those items which Dr. Goodhope believed Mr.
Wetch needed by way of medical care as of September 15, 2016. Id.
Similarly, defendants’ reference to plaintiff’s counsel’s brief before the state
circuit court does not include a declaration that Mr. Wetch’s claim was false.
See Docket 65-1 at p. 71 ¶ 5 (referencing id. at pp. 127-149 [Exhibit D]).
The court finds defendants’ objection to be specious and disingenuous.
The court rejects defendants’ invitation to engage in character assassination of
plaintiff’s attorney.
Defendants’ fifth objection to the R&R is overruled.

20

6.

Defendants’ third objection claims the R&R erroneously fails to
acknowledge that the rebuttable presumption of SDCL § 62-4-1 is a
question of fact.
In 1993, the South Dakota Legislature amended SDCL § 62-4-1 to

include the following language:
If an injured employee has not required medical treatment for a
period of three years, it is presumed that no further medical care
with respect to the injury is necessary. Documentation that the
injury is work related by the primary treating or rating physician
after three years shall automatically rebut the presumption.
However, the claimant may present other medical proof to rebut the
presumption.
These provisions were removed from § 62-4-1 in 1999.

The R&R recognized

this rebuttable presumption was not included in § 62-4-1 before 1993 and was
removed in 1999. (Docket 131 at p. 57 n.17).
The R&R acknowledged the South Dakota Supreme Court “applied the
presumption retroactively to an employee’s claim . . . which stemmed from a
1985 work injury.” Id. (citing Kester, 571 N.W.2d at 384. The R&R
recognized “[p]resumptions—especially rebuttable presumptions—are generally
considered procedural, not substantive, so they can permissibly be applied
retroactively.” Id. (internal reference omitted).
The R&R concluded:
The rebuttable presumption does not provide defendants with a
reasonable basis for their denial of benefits. First, Mr. Wetch did
rebut the presumption when he presented his August, 2011, letter
from his treating physician stating that the medical expenses were
work-related. Second, the opinion of defendants’ own IME doctor
also rebutted the presumption when he opined the four medical
21

expenses were work-related. The court rejects this argument as a
basis for denying Mr. Wetch’s motion.
(Docket 131 at p. 57) (paraphyses omitted).
While this conclusion might be otherwise convincing, the R&R earlier
refused to invoke judicial estoppel to hold defendants to their position they
were 100 percent responsible for the four items identified by Dr. Wojciehoski.
Viewing the facts and inferences from those facts in the light most
favorable to defendants, the record of medical treatments indicates
Mr. Wetch went from October, 2006, until sometime shortly after his
2010 fall without receiving medical treatment for which he sought
reimbursement from defendants. Then after his fall, he again
sought medical treatment and asked defendants to bear the cost.
It is unknown whether Dr. Goodhope and Dr. Wojciehoski would
reach the same conclusions about whether Mr. Wetch’s post-fall
medical treatment was related to the work injury if they knew about
the 2010 fall.
There is sufficient evidence of mistake or
inadvertence to give the court pause about exercising its discretion
to apply judicial estoppel under these circumstances.
Id. at p. 50.
Defendants argue the R&R “should be modified to recognize a question of
fact on this issue.” (Docket 136 at p. 5). “[I]t is generally the rule that a
presumption vanishes when evidence of the fact in issue appears. A
presumption is rebutted when a contrary fact appears.” Traders & General
Ins. Co. v. Powell, 177 F.2d 660, 665 (8th Cir. 1949). “Problems presented by
conflicting evidence or depending upon credibility of witnesses and weight of
the evidence are to be decided by the jury and not by . . . the trial court.”
Skrovig v. BNSF Railway Co., 916 F. Supp. 2d 945, 973 (D.S.D. 2013) (citing
Traders, 177 F.2d at 663).
22

The R&R’s rejection of the physicians’ reports requires the court to
conclude the rebuttable presumption issue is a factual matter which must be
decided at trial. Skrovig, 916 F. Supp. 2d at 973. The court arrives at this
conclusion even though in resolving the next objection the court rejects the
R&R’s opinion regarding possible changes in Dr. Goodhope’s testimony.
Defendant’s third objection to the R&R is sustained.
7.

Plaintiff’s tenth objection asserts the R&R makes clearly erroneous
findings of fact relating to Dr. Goodhope’s opinions.
Mr. Wetch argues the R&R’s conclusions regarding Dr. Goodhope’s

opinions are mistaken. (Docket 137 at pp. 26-27). Plaintiff submits “[a]s Dr.
Goodhope’s testimony shows, he was aware of the April 2010 fall when he first
met Mr. Wetch in 2011.” Id. at p. 27 (referencing Docket 138-5).
Defendants submit “Dr. Goodhope’s testimony regarding the April 2010
fall can charitably be described as contradictory, imprecise, and equivocal[.]”
(Docket 144 at pp. 27-28). They argue “Dr. Goodhope cannot state he recalls
reviewing the records of the April 2010 fall at the time he began treating
Wetch.” Id. at p. 28.
Dr. Goodhope’s deposition was taken on October 24, 2018, nearly 7.5
years after Dr. Goodhope’s first visit with Mr. Wetch. (Docket 99-4). To fully

23

understand the doctor’s opinions concerning Mr. Wetch’s 2010 fall, the court
must set out a significant portion of the doctor’s testimony on the subject.19
Q

Are you familiar with David Wetch?

A

I am familiar with David Wetch.

Q

How are you familiar?

A

I believe David Wetch came to me in April of 2011 for our first
visit.

Q

What was the purpose of that visit?

A

I was to refill his pain medications.

Q

Did you learn at that visit whether or not David Wetch had
suffered any work injury?

A

I knew that he had fallen and had fractured his neck, at that
visit, at work.

(p. 12:14-25).
...
Q
And how did you learn that?
A

I pulled up Dr. Waltman’s records and also looked at his
records, I think, from an ER visit . . . and asked him.

Q

Can you identify the specific record that you looked up prior
to David Wetch arriving at your office?

A

All right. Let me look here. So under Patient Documents
. . . . So this would have been called Patient Chart Documents,
the
folder,
and
the
specific
file
would
be
MT.docs.Wetch.David. . .
. 1964. At the time I would
have looked at this, since it was in April of 2011, it would have

...

19Because

there are four pages of transcript on a single page, the court
will cite to the actual transcript page and line for ease of the reader. Vocal
inflections of counsel are omitted. All references are to Docket 99-4.
24

been a paper chart. . . . Our office went to electronic charts in
June of 2011, sort of as everyone was. And at that point, this
chart was then scanned into the file which I’m referring to
right now.
(p. 13:1-9 & 12-24).
...
Q
Can you tell me what you learned from reviewing the thenpaper chart of David Wetch before he arrived for your first visit
in April 2011?
A

So, I knew that at April 6, 2010, he’d been in the ER at 1641
hours. He had a CAT scan of his head, which was ordered
for pain after a fall. There was no hemorrhage noted, and
there was no fractures seen. He also had a CAT Scan, or a
CT scan, of his neck—I’m going to get that—which was also
done at the same time, same date, April 6, 2010. It was
ordered by Dr. Eide at the ER. The next CT findings were
there was a blocked vertebra with fusion of the bodies of C2
through C5. Marked narrowing is present at disc space at
C2-3. This is associated with anterior spurring. Mild disc
narrowing is present from C5 through T1 associated with
minimal posterior spurring. There is straightening of the
cervical spine secondary to the fusion of the midvertebral
bodies. No acute fractures noted. No prevertebral soft
tissue swelling is seen. So the impression was there was a
blocked vertebral fusion of C3 through . . . through C5.
Degenerative changes are noted in the remainder of the
cervical spine, and no fracture is noted. That was read by Dr.
Jamie Schaeffer in the radiology department.

(pp. 14:20-15:24).
...
A
I hadn’t had a chance to finish answering the question because
you
Q

I’m sorry if I interrupted you.

A

You had asked me everything that I had learned, and I was
talking about the documents. Now I’m going to go into the
notes part. So this file is called Paper Chart Documents
MT.notes.Wetch.David. . . . 1964. . . . I did see him April 25,
2011. Then I saw him again on May 25, 2011. Prior to that,
25

he had seen Dr. Waltman on April 12, 2010. So I would have
looked at Dr. Waltman’s note. I can read it if you want.
(p. 16:8-24).
Q

Just tell me what you concluded from reading Dr. Waltman’s
April 12, 2010 note at the time you first saw David Wetch.

A

That he’d had a fall. He thought he was unconscious for two
seconds. He had some neck pain and had the CAT scan of
his head and neck, which didn’t show any acute problems.
Dr. Waltman had given him a prescription for Flexeril and
Tylenol with Codeine. He had done pretty well. So Dr.
Waltman’s assessment at that time was status post fall with
concussion and neck strain. He refilled his Soma, advised
him not to take the Soma and the Flexeril at the same time.
And so then I would have made my note, which should have
been my very first note with him. So it says the first time I
met David, April 25, 2011. I’m accessing that note to help
my memory. So I just said he was disabled, lived in an
apartment. His father had recently passed away, making
him feel somewhat depressed, but he wasn’t having any
suicidal thoughts at that time, didn’t want any antidepressant
medicine at that time. And then I noted at age 27, he fell and
broke his neck and underwent a C3-to-C5 cervical fusion.
Then I said: Since that time, he’s had chronic tingling,
numbness, headaches, weakness in the arms, and he wanted
an evaluation for a possible TENS unit. I noted that he had
also had a history of cerebral palsy, and that day he needed a
wheel walker with a seat. Currently he had been using a
cane. And he also needed handicap sticker at that date. So I
did my evaluation, and my assessment was chronic pain in
the neck with a history of cerebral palsy. So I completed the
handicap sticker. I noted that clearly the patient was unable
to walk a distance without help. I noted that it took him
about five minutes to walk 30 feet to the lab. I ordered
physical therapy to assess him for a TENS unit. I saw that
he hadn’t had annual labs for a while, so I ordered cholesterol,
thyroid, blood count, metabolic panel, urinalysis. Asked him
to follow up in a month so we could review the lab results and
find out if he got everything that we ordered. And then I—I
offered to treat him with Cymbalta.
That was an
antidepressant that works with chronic pain, but he didn’t
26

want it at that time, so we just said we’d revisit it in a month.
I noted that he understood the treatment plan, and he left the
clinic in good condition. And I signed my note.
(pp. 16:25 -19:6).
...
Q
And you mentioned that you looked at . . . an April 2010 fall;
is that right?
A

April 2010 note from Dr. Waltman, which was when the
patient would have—I guess, followed up with Dr. Waltman
status post the fall.

(p. 19:18-25).
...
Q
And do you know whether you had seen the note that’s
marked as Exhibit 3 before you pulled the record up yourself
in preparation for the deposition?
A

I saw Exhibit 3 last night when I was looking at the old records
that were scanned in, and I’m—my memory is imperfect, but
I’m—I don’t see how I would have not looked at it when I saw
him for the first time in April of 2011.

Q

Do you recall reviewing Exhibit 3 before you visited with Mr.
Wetch for the first time?

A

It’s hard to imagine I would not have.

Q

But you don't remember doing so; is that true?

A

It’s seven and a half years ago, so . . . .

(p. 22:12-25).
...
A
My recollection would be that I would have looked at the note.
I always try to look at old records prior to seeing a patient
that’s new to me.
Q

On Exhibit 3, it talks about the fact that there was a fall where
Mr. Wetch hit his head and resulted in neck pain; is that
right?
27

A

Correct.

(p. 23:4-11).
...
Q
Do you recall learning, before you saw Mr. Wetch, that he had
suffered from a fall in which he had a cervical injury and that
it resulted in him becoming unconscious?
A

Yes.

Q

And did you talk to Mr. Wetch about that when you saw him
for the first time on April 25, 2011?

A

Can I look at Exhibit 2? . . . I don’t recall if I talked to him
about the fall or not.

(pp. 24:2-10 & 21-22).
...
Q
And do you know whether Mr. Wetch had received Vicodin for
purposes of the April 2010 fall?
A

I don’t know.

Q

Did you ask him?

A

I can’t recall.

Q

Can you recall anything about any discussion you had with
Mr. Wetch about the April 2010 fall?

A

All my recollection is based on these notes.

(p. 26:13-21).
...
Q
What do you recognize Exhibit 4 [notes from Rapid City
Medical Center] to be?
A.

The note I created in the medical record on August 1, 2011.

(p. 30:9-11).
...

28

Q

Is there anywhere in the Past Medical History for David Wetch
that you created on August 1, 2011 that indicates the April
2010 fall?

A

No

Q

Did you understand the April 2010 fall involved a cervical
injury?

A.

When I read the CAT scan that showed no fracture, I would
have been reassured that there was no damage to the prior
surgery and that he’d had injury before. CAT scan report.

(p. 31:4-13).
Q

Are you able to say, to a medical degree of certainty, as to
whether the headaches that you had identified and prescribed
in April of 2011 were the results of something that originated
a year earlier in April 2010 from a fall that required emergency
treatment and a neck injury or whether it related to a fall and
injury two decades earlier in 1991?

A

Since I would have looked at the CAT scan and Dr. Waltman’s
note and I would have read the “pretty well resolved,” I would
have assumed any ongoing problems were probably more
related to his permanent disability and not the fall that had
happened like a year earlier. And the main focus of my visit
the first time would have been to get to know the patient and,
kind of, a lot of different problems. It wouldn’t have been
something that happened a year earlier that pretty much
looked in the chart like it had already resolved.

...

(pp. 33:14-21 & 34:2-13).
...
Q
Are you able to say, to a reasonable degree of medical
certainty, that the headaches you were treating in April of
2011 in that summer with Mr. Wetch, that that related to an
injury two decades earlier in 1991 as opposed to the neck and
head injury that occurred a year earlier which also resulted in
headaches?
A

It is my opinion that the headaches I saw him for in April of
2011 were related to the earlier injury.
29

Q

How do you—how do you come to that opinion?

A

Because Dr. Waltman’s notes said that the headaches were
pretty well resolved, and the CAT scan that was done after the
injury showed no acute injury.

(pp. 34:19-35:8).
...
Q
Can you tell . . . me how you related the headaches that
occurred in April 2011 to the injury that occurred two decades
earlier in 1991 and rejected the fact that it might be a
continuation of the headaches from April 2010, which had
only pretty much resolved at that point?
A

I would have looked at the CAT scan as part of my review of
records and saw that at the time he was seen in the ER, it
didn’t show any acute injury. I would have looked at the old
note that said that headache was pretty well resolved from the
physician taking care of Mr. Wetch before me. I would have
looked at the part where I made a little note here that said he
was permanently disabled, and then I would have treated it
based on that.

Q

Okay. And how did the headaches reappear in . . . April of
2011?

A

It’s—it’s possible that someone could have had headaches
related to a prior injury, then have a fall and have an acute,
worsening headache from a concussion. And then once that
resolves, they would go back and have the same symptoms
they would have had from the prior injury.

Q

Okay. That’s possible; right?

A

I think it’s likely in this case.

(p. 36:1-25 to 37:5).
...
Q
Okay. Did Dr. Waltman indicate that in April 2010, that after
the fall in which Mr. Wetch became unconscious, that he
suffered from a concussion?

30

A

Yes. In his note, April 2010.

(p. 37:10-14).
...
Q
Is it fair to say that when you saw . . . Mr. Wetch . . . you
learned about a concussion, but the specifics of that
concussion were not conveyed to you?
A

No.

Q

That’s not true?

A

There were specifics conveyed to me in the note that I would
have reviewed from Dr. Waltman.

(p. 38:19-39:1).
...
Q
Exhibit 5 is a hospital record relating to David Wetch had a
fall on April 6, 2010. Do you recognize Exhibit 5?
A.

This is the first time I’ve seen Exhibit 5 . . . This is the first
time I’ve seen Exhibit 5 that I recall.

(p. 40:9-12).
...
Q
Exhibit 6 is identified as a Regional Hospital Emergency
Department record relating to David Wetch on April 6, 2010.
Do you recognize Exhibit 6?
A

No. I know what it is. This is the first time I’ve seen it, that
I recall.

(p. 41:4-9)
...
Q
In April of 2011, you didn’t have Exhibits 5 and 6; is that
right? You just testified to it. I just want to—
A.

I was just looking to see if the CT reports were in there. They
are not. So no, I wouldn’t have had them.

(p. 41:19-24).

31

Defendants’ conjecture and argument challenging Dr. Goodhope’s
credibility are without merit. Mere allegations, unsupported by specific facts
or evidence beyond a nonmoving party’s own conclusions, are insufficient to
withstand a motion for summary judgment. Thomas v. Corwin, 483 F.3d 516,
527 (8th Cir. 2007).
While Dr. Goodhope may have sought to limit his testimony, there is no
doubt Dr. Goodhope saw the 2010 medical records before his first appointment
with Mr. Wetch in 2011. The fact he discounted the 2010 fall as the cause of
plaintiff’s headaches is an issue the defendants would now like the court to
reject. The court will not engage in that exercise. The court finds the
magistrate judge improperly discounted Dr. Goodhope’s sworn testimony. The
court rejects the R&R’s statements regarding Dr. Goodhope’s testimony.
Plaintiff’s tenth objection is sustained.
8.

Defendants’ first objection and plaintiff’s third objection both focus on
the R&R’s analysis of Hayes and its retroactive effect.
Defendants’ objection asserts the R&R erroneously concluded, based on

Dr. Wojciehoski’s opinion, that the defendants “ ‘acted contrary’ to pre-Hayes
law.” (Docket 136 at pp. 2-3). Plaintiff’s objection contends the R&R “errs in
its analysis of the ‘retroactive effect’ of Hayes.” (Docket 137 at pp. 12-14).
The R&R concluded “[u]nder established South Dakota precedent in
1991, Mr. Wetch only had to show that his work injury was a ‘contributing
factor’ to his need for medical treatment.” (Docket 131 at p. 58) (bold omitted;
underlining inserted) (referencing Caldwell v. John Morrell & Co., 489 N.W.2d
32

353, 357-58 (S.D. 1992) (A claimant “must establish . . . that there is a causal
connection between his injury and his employment. . . . This causation
requirement does not mean that the employee must prove that his employment
was the proximate, direct, or sole cause of his injury; rather, the employee
must show that his employment was ‘a contributing factor’ to his injury.”)
(internal citations omitted).
Defendants contend the R&R “does not include other relevant authorities
informed on these issues.” (Docket 136 at p. 3 n.2) (referencing Orth v.
Stoebner & Permann Construction, Inc., 724 N.W.2d 586, 592-97 (S.D. 2006),
and Grauel v. South Dakota School of Mines and Technology, 619 N.W.2d 260,
262-63 (S.D. 2000)). Defendants’ argument is without merit.
In Hayes, the South Dakota Supreme Court specifically summarized
Orth. “See Orth . . . 724 N.W.2d . . . 596-97 (holding claimant met his burden
of proving by a preponderance of the evidence that his work-related activities
were a major contributing cause of his disability based on a physician’s opinion
that claimant’s work-related activities were fifty percent responsible for his
impairment).” Hayes, 853 N.W.2d at 885.
Grauel referenced a 1995 amendment to SDCL § 61-1-1(7) which is not
relevant to Mr. Wetch’s case.20 Grauel did reinforce that the employee “must

20Specifically,

Grauel acknowledged the amendment clarified a workers’
compensation injury includes “only those injuries arising out of and in the
course [of] the worker’s employment and not including any diseases except a
disease caused by the injury.” Grauel, 619 N.W.2d at 263.
33

show . . . the employment . . . was a major contributing cause of the condition
complained of . . . .” Id. A more detailed summary of Orth and Grauel in the
R&R would not have changed the ultimate conclusion reached, that is, that
defendants “acted contrary to established pre-Hayes law in another respect.”
(Docket 131 at p. 58).
The R&R concluded “[b]ecause Dr. Wojciehoski opined that Mr. Wetch’s
work related injury was 50% responsible for the need for medical treatment,
Dr. Wojciehoski’s opinion alone mandated that defendants pay 100% of the
expenses related to the four treatments approved by him.” Id. at p. 59.
“Defendants did not pay 100% of the expenses for those four treatments.
Instead, they paid 50% of the cost of the treatments and told Mr. Wetch he was
responsible for the other 50% of the cost.” Id. Defendants’ first objection
asserts this was an erroneous conclusion. (Docket 136 at pp. 2-3).
The R&R found that even after Hayes was issued in August 2014,
defendants failed to comply with their statutory obligation and, in fact, a DOL
order:
On November 6, 2015, defendants filed a pleading with the DOL
admitting they were responsible for the full cost of . . . the four items
identified as compensable by Dr. Wojciehoski. . . . On January 28,
2016, the DOL issued an order directing defendants to pay the full
cost of the four items defendants themselves admitted they owed
. . . . Defendants still failed to cough up the other half of the money
for these items until December, 2016, and January, 2017.
(Docket 131 at p. 59) (internal references to the record omitted).

34

Defendants’ first objection is overruled. More importantly, however,
defendants’ first objection is irrelevant to the ultimate conclusion reached in
the R&R. The R&R concluded “partial summary judgment should . . . not
issue to Mr. Wetch on the basis of defendants’ handling of the expenses for the
four items approved by Dr. Wojciehoski.” Id. at p. 60. The R&R identified two
reasons for this conclusion.
First, defendants have indicated pursuant to Baier 21 that they
were/are awaiting a final decision of the DOL in order to appeal each
of these piecemeal rulings on partial summary judgment motions.
Second, defendants’ admission was based on Dr. Wojciechowski’s
IME and that IME is on uncertain ground now that the fact of Mr.
Wetch’s 2010 fall has come to light.
Id.
While not exactly on point with defendants’ objection, plaintiff contends
the R&R “errs in its analysis of the ‘retroactive effect’ of Hayes.” (Docket 137
at pp. 12-14). The magistrate judge determined “there is good reason to
conclude the law in Hayes is new and not retroactive.” (Docket 131 at p. 65).
The magistrate judge was “not convinced that Sopko I or Sopko II established
the same proposition as was established in Hayes. Nor is the court convinced
defendants are absolutely as a matter of law on notice of their duty to proceed
solely under § 62-7-33 by virtue of the text of that provision.” Id. at pp. 67-68.
The magistrate judge concluded “until Hayes was decided, [Sopko I] . . . would

21Baier

v. Dean Kurtz Const., Inc., 761 N.W.2d 601 (S.D. 2009).
35

not seem to dictate that an employer/insurer who has no reason to believe the
employee’s physical condition has changed, but [the employer/insurer] who
wishes to challenge a medical treatment as not necessary, suitable or proper,
would be required to proceed exclusively under § 62-7-33.” Id. at p. 68.
In 1990, the South Dakota Supreme Court held “[b]y virtue of SDCL 627-33, [DOL] has continuing jurisdiction to adjust any payment from the
original injury based upon a change of condition occurring since the last
award.” Whitney, 453 N.W.2d at 850. “An agreed stipulation entered into
between employer and employee, which is filed and approved by Department,
may have the effect of a final determination.” Id. The court approved the trial
court’s conclusion that “[t]he language in the Stipulation and approval did not
lack finality. On the contrary, the Stipulation clearly permitted increased
benefits only if Whitney’s percent disability increased or if he required further
medical treatment as a result of his working injury.” Id. (emphasis added).
The court concluded that DOL’s “failure to reserve jurisdiction, especially when
considering the specific provisions of the stipulation, renders those issues res
judicata absent a showing of change of condition.” Id.
In 1993, the South Dakota Supreme Court held “[t]he holding in Whitney
was decided on well settled law of this state that worker’s compensation
awards, whether by agreement of the parties or following an adjudication, are
res judicata as to all matters considered unless the department has reserved
continuing jurisdiction over one or more questions.” Larsen, 509 N.W.2d at
36

706. The Larsen court stated “[a] statutory exception to the finality rule is
found in SDCL 62-7-33 which gives the Department continuing jurisdiction to
adjust payments when there is a physical change in the employee’s condition
from that of the last award.” Id. at 707 (referencing Whitney, 453 N.W.2d at
850-52; other references omitted). “While some members of the general public
and the Department may have operated under a misunderstanding of the law
of this state, we are of the opinion that our decision in Whitney should not
have come as a surprise to anyone in that it was based on common sense and
clear precedents of this court.” Id. Reflecting on “apparent[] dictum” in Call,
307 N.W.2d 138, the Larsen court reminded its readers “the ‘provision
purporting to authorize a review in the event that claimant incurred further
disability or medical expenses’ is nothing more than a restatement of the
statutory provision permitting a change in payment based upon a change in
condition.” Id. at 708 (emphasis added) (citing Call, 307 N.W.2d at 140).
The Larsen court “agree[d] with the Call . . . court that the questioned
language is merely a restatement of 62-7-33.” Id. 509 N.W.2d at 708 n.4.
The Larsen court concluded:
The case precedent of this court is contrary to the Department’s
settlement agreement policy, practice, and procedure. The fact,
however, that the Department may have given faulty legal advice
does not change the fact that Whitney neither overruled clear past
precedents nor did it decide an issue of first impression whose
resolution was not clearly foreseen. We, therefore, conclude that
Whitney may be retroactively applied and we reverse the trial court
on this issue.
Id.
37

In 2011, the South Dakota Supreme Court, reflecting on its historical
rulings and interpreting SDCL § 62-4-1, stated “[i]t is in the doctor’s province
to determine what is necessary or suitable and proper. . . . And ‘[w]hen a
disagreement arises as to the treatment rendered or recommended by the
physician, it is for the employer to show that the treatment was not necessary
or suitable and proper.’ ” Stuckey, 793 N.W.2d at 387-88 (citing Streeter, 677
N.W.2d at 226) (quoting Krier, 473 N.W.2d at 498; also referencing Engel v.
Prostrollo Motors, 656 N.W.2d 299, 304 (S.D. 2003); Hanson, 425 N.W.2d at
399). In Stuckey, the South Dakota Supreme Court held “[w]hen [an
employee] incurs medical expenses in the future, Employer may reimburse
[him] or challenge the expenses as not necessary or suitable and proper under
SDCL 62-7-33.” Stuckey, 793 N.W.2d at 389. The Stuckey court offered the
insurer no other options, either “reimburse . . . or challenge . . . under . . . 627-33.” Id.
On August 27, 2014, the South Dakota Supreme Court decided Hayes.
“When SDCL 62-1-1(7) is read not in isolation but as a whole in light of other
enactments, specifically SDCL 62-7-33, the statute’s intent is not to place a
continuous burden on a claimant once he . . . proves a compensable injury.
Instead, once claimant proves a compensable injury, SDCL 62-7-33 provides
the method for a party to assert a change in condition.” Hayes, 853 N.W.2d at
886 (emphasis added). “[I]f a claimant proves a compensable condition under
SDCL 62-1-1(7) and the employer subsequently feels claimant’s condition no
38

longer ‘remains a major contributing cause of the disability, impairment, or
need for treatment [,]’ . . . the employer may assert a change-of-condition
challenge under SDCL 62-7-33 where it bears the burden of proof.” Id. (citing
SDCL § 62-1-1(7)(b)). “Employer may assert that Hayes’ condition changed
after August 3, 2010, and his condition no longer ‘remains a major contributing
cause of the disability, impairment, or need for treatment.’ . . . To argue that,
Employer must assert a change in condition under SDCL 62-7-33 where it, not
Hayes, bears the burden of proof.” Id. at 887 (citing SDCL 62-1-1(7);
emphasis in opinion).
The magistrate judge concluded prior case law, namely, Sopko I and
Sopko II, did not “establish[] the same proposition as was established in
Hayes.” (Docket 131 at p. 67). To examine the magistrate judge’s conclusion,
the court must review the holdings in those earlier cases.
In Sopko I, the court acknowledged that “[o]rdinarily, workers’
compensation awards whether by agreement or adjudication are final unless
the department reserves jurisdiction.’ Id., 575 N.W.2d at 229. The court
recognized that “South Dakota’s statutory exception to the finality rule is found
in SDCL 62-7-33[.]” Id. at 230. “Under this statute the [DOL] has continuing
jurisdiction to review ‘any payment’ when there has been a physical change in
the employee’s condition from that of the last award.” Id. “The ‘change in
condition’ which justifies reopening and modification is ordinarily a change, for
better or worse in the claimant’s physical condition.” Id. (internal citation
39

omitted). “Only after a party asserting a ‘change in condition’ has met the
required burden may the [DOL] reopen a previous award.” Id. at 231.
The court found “[a]nalyzing SDCL 62-7-33 and 62-3-1822 together, we are
persuaded our Legislature intended to disallow agreements foreclosing
statutory rights to reopen in the event of changes in condition resulting from
undiscovered or unforeseen consequences.” Id.
In Sopko II, the South Dakota Supreme Court declared “according to our
prior case law and the relevant statutory authority, [DOL] may review any
payment of benefits pursuant to SDCL 62-7-33, however, the rate for
calculating benefits that is utilized vests at the time of the injury.” Id., 665
N.W.2d at 97. Emphasizing the clarity of this declaration, the court stated
“[t]his is not a new or novel proposition.” Id.
Plaintiff argues the R&R “errs in its analysis by failing to consider the full
scope of SDCL 62-7-33’s language. . . . In addition, Stuckey makes it clear that
an employer or insurer’s procedural remedy to challenge care required by
SDCL 62-4-1 is 62-7-33.” (Docket 137 at pp. 12-13). Mr. Wetch asserts the
R&R “fails to apply Larsen, which is directly on point of this analysis of SDCL
62-7-33. In Larsen, . . . the Court applies ‘retroactivity’ analysis specifically to
SDCL 62-7-33[.]” Id. (emphasis omitted; referencing Whitney, 453 N.W.2d

22SDCL

§ 62-3-18 provided “[n]o agreement, express or implied, . . . may
in any manner operate to relieve any employer in whole or in part of any
obligation created by the title except as provided by this title.”
40

847). Plaintiff argues “Larsen explains that rulings of the DOL have the effect
of res judicata―the finality rule. . . . This has been the law for decades. . . .
Hayes simply reaffirms the ‘finality’ rule, with SDCL 62-7-33 as the exception
to finality. . . . Hayes did not announce new law regarding SDCL § 62-7-33.”
Id. at pp. 13-14 (internal citations to Larsen omitted).
The court agrees with plaintiff’s analysis. It has been clear since
Whitney in 1990 that SDCL § 62-7-33 is the exclusive statutory mechanism by
which an insurer can challenge an employee’s medical expenses. Whitney,
453 N.W.2d at 850. The Larsen court emphasized this point. “The holding in
Whitney was decided on well settled law of this state[.]” Larsen, 509 N.W.2d at
706. Stuckey made even more clear the options available to an insurer, either
reimburse the employee for medical expenses “or challenge the expenses as not
necessary or suitable and proper under SDCL 62–7–33.” Stuckey, 793 N.W.2d
at 389. Hayes did not announce new law in this regard. The court finds the
magistrate judge erred and the R&R is rejected on this issue.
The only clarification Hayes made was if the insurer originally admitted
causation and a subsequent IME concludes a claimant’s work-related activities
were 50 percent responsible for his impairment, the insurer is obligated to pay
100 percent of the employee’s medical expenses. Hayes, 853 N.W.2d at 885
(referencing Orth, 724 N.W.2d at 596-97.
The R&R recognized this directive from Hayes. “Because Dr.
Wojciehoski opined that Mr. Wetch’s need[s] . . . were necessitated 50% by his
41

work-related injury and 50% by his preexisting cerebral palsy, this was
sufficient to demonstrate the work related injury is . . . a ‘contributing cause’
for the need for these treatments, thereby requiring defendants to pay 100% of
the expenses.” (Docket 131 at p. 12 n.8). Defendants acknowledged this
obligation in their response to Mr. Wetch’s first motion for summary judgment
before the DOL. (Docket 44-15 at p. 11) (“Employer and Insurer acknowledge
that they are responsible for 100% of those expenses.”).
Plaintiff’s third objection is sustained.
9.

Plaintiff’s second objection asserts the R&R misinterpreted South
Dakota’s worker’s compensation procedure.
Plaintiff’s objection focuses on the R&R’s perception there are other

avenues by which an employer may challenge an employee’s medical care
expenses besides SDCL § 62-7-33. (Docket 137 at pp. 7-12). Plaintiff argues
the R&R “errs by suggesting that the Defendants could have followed other
procedures, which do not exist in the statutory code or which the Defendants
did not actually follow.” Id. at p. 10 (referencing Docket 131 at pp. 60-70)
(emphasis omitted).
The court already rejected the R&R for its failure to correctly apply SDCL
§ 62-7-33. See pp. 41-42 supra. The R&R’s suggestion of other options
available to an insurer for challenging an employee’s medical care ignores the
mandate of Whitney, Larsen and Stuckey analyzed earlier in this order. The
court finds the magistrate judge erred and the R&R is rejected on this issue.
42

Plaintiff’s second objection is sustained in part consistent with the
court’s earlier ruling sustaining plaintiff’s third objection.
10.

Plaintiff’s fourteenth objection asserts the R&R errs in its analysis
of Herr v. Dakotah, Inc.
Mr. Wetch argues the R&R erred by concluding Herr provided case

authority to permit defendants to invoke SDCL § 62-4-1 as an alternative to
§ 62-7-33. (Docket 137 at pp. 31-32) (referencing Docket 131 at pp. 39-41).
Mr. Wetch claims the error on this issue results in an “incorrect application of
SDCL 62-4-1” because “[t]he Report’s analysis confuses the calculation of the
amount of disability benefits with the ‘open’ nature of future medical benefits
in the workers’ compensation setting.” (Docket 137 at pp. 31-32).
While Herr involved temporary total disability benefits, the principle
ruling of the South Dakota Supreme Court allowed the insurer to ask the DOL
to determine whether plaintiff had reached maximum medical improvement,
that is, whether the employee was no longer entitled to temporary total
disability benefits. Herr, 613 N.W.2d at 555. DOL’s own ruling indicated it
intended to “retain[] jurisdiction over this case ‘until all issues of compensation
are finalized,’ thereby precluding final judgment on the merits of whether, and
when, Herr reached maximum medical improvement.” Id. (citing Call, 307
N.W.2d at 139). The Court concluded the circuit court erred by dismissing the
employer’s “appeal on the basis of res judicata.” Id.

43

The R&R included a detailed examination of Herr. (Docket 131 at
pp. 39-41). The analysis correctly recognized that if the DOL retains
jurisdiction the doctrine of res judicata may be applied in one instance to a
ruling of the DOL [“factual issues already litigated”] but not in another
[whether an employee has “reached maximum medical improvement”]. Id.
(referencing Herr, 613 N.W.2d at 551 & 555). The R&R properly analyzed Herr
and did not attempt to use Herr to evaluate defendants’ argument they could
invoke § 62-4-1 as opposed to § 62-7-33 as statutory authority to challenge Mr.
Wetch’s medical care benefits.
Plaintiff’s fourteenth objection is overruled.
11.

Plaintiff’s thirteenth objection claims the R&R misinterpreted and
misapplied plaintiff’s Due Process Clause arguments.
Mr. Wetch argues the magistrate judge misunderstood his Due Process

claim. (Docket 137 at p. 29) (referencing Docket 131 at pp. 34-36). Plaintiff
now makes clear his claim is premised on the assertion “that any interpretation
of the law that allows an employer or insurer to end statutory benefits, without
notice or a hearing before the DOL, is unconstitutional.” Id. (emphasis
omitted). Mr. Wetch submits the R&R’s “suggestion that the Defendants did
not need to proceed to the Department at all is an unconstitutional
interpretation of the workers’ compensation laws.” Id. (emphasis omitted).
In other words, Mr. Wetch is arguing that since an injured employee has
a statutory right to “ongoing receipt of medical benefits under SDCL 62-4-1 . . .
44

[those] [s]tate statutory rights create a property interest in the continued
receipt of those benefits and payments which must be protected by Due
Process.” Id. at p. 30 (emphasis omitted). If defendants are permitted to
reduce or limit plaintiff’s SDCL § 62-4-1 “property interests without notice and
a hearing,” Mr. Wetch submits that process would violate the Due Process
clause. Id.
Defendants’ response suggests “[t]he operative lesson in the [R&R’s]
lengthy discussion [of Hayes] is to dismiss Wetch’s contention the ‘procedural
protection’ he seeks existed before the South Dakota Supreme Court decided
Hayes. (Docket 144 at p. 30). For this reason, defendants recommend
plaintiff’s objection should be overruled. Id.
Plaintiff’s Due Process challenge is moot. Earlier in this order the court
concluded SDCL § 62-7-33 is the only method by which an insurer may seek to
change or terminate medical care benefits.23 That procedure, together with
SDCL § 62-7-12, provides Mr. Wetch with notice and a hearing before his
statutory benefits can be affected. Because the magistrate judge did not
evaluate Mr. Wetch’s due process claim in this fashion, the R&R must be
rejected. (Docket 131 at pp. 34-36).

23The

only statutory exception to this mandate allows an insurer to
suspend benefits if an injured employee refuses to submit to an IME. SDCL
§ 62-7-3.
45

Plaintiff’s thirteenth objection is sustained in part and overruled in part
as moot.
12.

Plaintiff’s fifth objection claims the R&R errs by considering
defendants’ arguments that reject the rulings of the DOL and the
Circuit Court.
Plaintiff argues the R&R “errs by considering Defendants[’] arguments

that undermine the outstanding decisions and orders of the DOL and the
Seventh Judicial Circuit Court.” (Docket 137 at p. 15). Mr. Wetch contends
the R&R “subverts the ‘primary jurisdiction’ doctrine . . . , by considering
Defendants’ arguments that they wish to appeal from decisions, or argue new
bases of denial, such as the 2010 injury . . . .” Id. Plaintiff submits the R&R
“circumvents the [SDDOL] ruling [obligating defendants to pay 100% of the cost
of Mr. Wetch’s medical care pursuant to the stipulated agreement], suggesting
that the Defendants are able to dispute this issue before this Court.” Id. at
pp. 16-17 (emphasis omitted; referencing Docket 131 at pp. 16-17). Mr.
Wetch argues the R&R’s analysis “violates the principles that these
determinations [belong] to ‘the court of first instance.’ ” Id. at p. 17
(referencing Celotex Corp. v. Edwards, 514 U.S. 300, 313 (1995) (“It is for the
court of first instance to determine the question of the validity of the law, and
until its decision is reversed for error by orderly review, either by itself or by a
higher court, its orders based on its decision are to be respected.”) (internal
quotation marks and citations omitted).

46

The R&R recognized “[w]here an administrative agency has taken action
in a matter, the aggrieved party must generally exhaust administrative
remedies before appealing to the circuit court. . . . The exhaustion doctrine
determines when a circuit court can review agency action.” (Docket 131 at
p. 30) (emphasis omitted; internal citations omitted). “Under primary
jurisdiction, a court may defer to the agency for a ruling in order to obtain the
benefit of the agency’s expertise and experience, or to promote uniformity and
consistency within the particular field of regulation.” Id. at pp. 30-31 (internal
quotation marks and citation omitted). When exhaustion of administrative
remedies has not occurred, “federal courts may stay their hand or decline to
accept jurisdiction over a bad faith claim while administrative actions are still
pending under the ‘primary jurisdiction’ doctrine.” Id. at p. 30 (citing Lagler v.
Zurich American Ins. Co., No. CIV 12-4037, 2012 WL 3264906, at *2 (D.S.D.
Aug. 10, 2012)).
Plaintiff objects to the R&R’s analysis that defendants, who
acknowledged before the DOL that they were 100 percent response for the four
items identified in Dr. Wojciehoski’s IME report, now “seek to disavow this prior
position on the basis of mistake, inadvertence or fraud.” (Docket 131 at
p. 49).
While the R&R properly analyzed and applied the law, the magistrate
judge failed to recommend the case be stayed and the defendants be required
to return to the DOL and exhaust their administrative remedies under SDCL
47

§ 62-7-33. Lagler, 2012 WL 3264906, at *2. Plaintiff endorsed this interim
remedial plan in his objections. (Docket 137 at p. 15).
Plaintiff’s fifth objection is sustained in part and overruled in part.
13.

Plaintiff’s eleventh objection contends the R&R misinterpreted and
misapplied the January 28, 2016, Order.
Mr. Wetch argues the R&R “errs by only considering the concluding

paragraphs of the DOL’s decision, when considering Defendants’ ‘dispute’
about what the DOL ordered.” (Docket 137 at p. 28) (referencing Docket 131
pp. 12-13). Because of the alleged misinterpretation of the January 2016
Order, Mr. Wetch asserts the R&R “misapplies the legal obligations of the
Defendants, which were effective even if not final.” Id. (emphasis omitted).
Defendants’ response to plaintiff’s objections argues the fact the R&R
“quotes only a selected portion of the January 28, 2016 Order does not mean
the magistrate judge did not read, consider, or understand the portions she
chose not to quote.” (Docket 144 at p. 28). Defendants assert the R&R
accurately “summarizes the substance” of the order. Id.
The analysis portion of the January 2016 Order contains the following:
Under the settlement agreement, Claimant has a permanent and
total disability. . . . Claimant’s treating physician, Dr. Goodhope, has
recommended a list of medical needs and prescriptions for Claimant
that he believes are necessary to assist with issues that Claimant
has with chronic neck pain and paralysis on the right side following
his work injury suffered in 1991. Some of the recommended
medical needs are a TENS unit, a wheelchair, cane, crutches, an
appropriate vehicle with hand controls, physical therapy and
hydrotherapy, future care for shoulder pain and deterioration, and
supervised living accommodations. Employer and Insurer, prior to
48

the settlement agreement, also knew from the IME report in 1993
that Claimant would need home care, services, and continuing home
exercise therapy. . . .
[I]t is well-settled in S.D. work comp law, that the Employer and
Insurer have the duty to prove that a recommended treatment is not
related to the injury, if the treating physician has recommended it
to the Claimant. . . . Employer and Insurer have not argued there is
a change in employee’s physical condition pursuant to SDCL § 627-33 and have not requested that the settlement be reopened.
(Docket 44-16 at p. 5). Based on the legal analysis contained in the order, the
DOL granted Mr. Wetch’s motion for partial summary judgment. Id. at p. 7.
Therefore, 1) The doctrine of res judicata bars Employer and Insurer
from denying benefits regardless of the fact they procured an IME
that stated Claimant’s current condition and need for treatment is
only 50% related to Claimants work-related injury. Res Judicata
applies to the settlement and all foreseen consequences as it is an
Order of the Department, thus medical care determined to be
reasonable and appropriate prior to the settlement agreement is
compensable; 2) Employer and Insurer are responsible for paying
100% of the medical care and treatment approved by Dr.
Wojciehoski; 3) Employer and Insurer are instructed to approve and
pay for the medical necessities that Claimant’s treating physician
indicates are related to the work-related injury. The question of
what is “related” and what is not “related” may only be answered by
the Claimant’s treating physician or if the settlement is reopened
due to change of condition. 4) Employer/Insurer are required to
follow SDCL 62-7-33 and show a change in condition in order to end
or diminish medical benefits.
Id. at pp. 7-8.
The R&R summarized three principle directives of the January 2016
Order but did not mention the directive of subsection 1 of the order. Compare
Docket 131 at p. 13 and 44-16 at p. 7. The magistrate judge acknowledged
the DOL’s finding of res judicata in the first motion for summary judgment.
49

(Docket 131 at p. 49). The magistrate judge’s refusal to apply res judicata to
the January 2016 order is not adversely affected by the failure to mention
subsection 1 of the order.
Plaintiff’s eleventh objection is overruled.
14.

Plaintiff’s seventh objection asserts the R&R errs by failing to
consider the preclusive effect of res judicata and collateral estoppel
as they relate to the Order of Contempt.
Mr. Wetch argues the R&R erred by failing to apply res judicata to the

order of contempt entered by the state circuit court on December 29, 2016.24
(Docket 137 at p. 22) (referencing Docket 44-19). Plaintiff contends “[t]he
Order of Contempt establishes both the first and second prong of bad faith, as
a matter of law and established fact. Defendants are unable to contradict the
findings and conclusions of this unappealed, final, decision.” Id. at pp. 22-23.
Defendants submit the R&R “fully considered this issue and concluded
‘the 2016 circuit court judgment does not partake of the full panoply of
“finality” usually accorded final judgments and it does not compel the
conclusion that defendants acted without a reasonable basis[.]’ ” (Docket 144
at p. 22) (citing Docket 131 at 43). Defendants suggest plaintiff “did not
appeal the circuit court’s order finding the Department had continuing

24The

order of contempt was based on an order to show cause for
contempt dated October 7, 2016, and a November 14, 2016, hearing. See
Docket 44-19 at p. 2.
50

jurisdiction (and thus there was no final order) regarding ‘other treatments and
prescriptions’ beyond the four items[.]” Id. at p. 23 (citing Docket 44-19).
The magistrate judge considered the December 2016 order of contempt
only to summarize the court’s findings and then concluded for purposes of the
judicial estoppel analysis that the defendants’ positions in the state litigation
and this litigation were not inconsistent. See Docket 131 at pp. 15-16 & 5152. The magistrate judge found “Mr. Wetch has failed to establish all the
elements necessary for this court to exercise its discretion and apply the
doctrine of judicial estoppel against defendants.” Id. at p. 52.
What the magistrate judge failed to recognize is defendants’ argument—
that they should not be held in contempt because the DOL proceedings are
ongoing and are not final—was rejected by the state court. The order of
contempt made the following findings:
On April 5, 2012, and February 10, 2014, the Defendant Insurer
denied 50% of its obligations for the four following treatments . . .
chose to reduce or alter its obligation to Plaintiff/Claimant for these
four treatments . . . paid 50% of [those] expenses . . . and . . . Since
at least November 6, 2015, the Defendant Insurer . . . has admitted
that it is responsible for 100% of these four expenses . . . Defendant
Insurer’s reduction or alteration of 50% of these treatments,
continuing failure to pay the remaining 50% . . . is willful and
contumacious of this Court’s . . . judgment [of August 1, 2016].
(Docket 44-19 ¶¶ 11-13 & 15-16). Based on those findings, the state court
held “Defendant Insurer is . . . in civil contempt of this court’s Judgment of
August 1, 2016 . . . and . . . [ordered] Defendant Insurer may purge contempt

51

by paying the remaining 50% balance of the expenses for the [four items] . . .
and 100% of the Soma medication expenses . . . .” Id. at p. 5 ¶¶ 1 & 2.
When the state court rejected defendants’ theory, they had three options:
(1) comply with the contempt citation; (2) seek a stay pending resolution of the
DOL proceedings; or (3) appeal the adverse decision to the South Dakota
Supreme Court. SDCL § 15-26A-6. They did not retain the ability to attack
the impact of the order of contempt by taking a position in federal court
inconsistent with the prior judicial decision. This is a classic example of issue
preclusion. “Issue preclusion, also known as collateral estoppel, bars a point
that was actually and directly in issue in a former action and was judicially
passed upon and determined by a domestic court of competent jurisdiction.”
Hayes, 853 N.W.2d at 882 (internal quotation marks, brackets and citations
omitted). See also New Hampshire v. Maine, 532 U.S. 742, 748-49 (2001)
(“Issue preclusion generally refers to the effect of a prior judgment in
foreclosing successive litigation of an issue of fact or law actually litigated and
resolved in a valid court determination essential to the prior judgment, whether
or not the issue arises on the same or a different claim.”). Defendants cannot
accomplish in this court what they failed to accomplish in an earlier, final
judicial ruling.
The court finds the R&R failed to properly analyze issue preclusion as
the doctrine applied to the order of contempt. The order of contempt is a prior
judgment which satisfied both elements of a bad faith cause of action.
52

Plaintiff’s seventh objection to the R&R is sustained.
15.

Plaintiff’s eighth objection asserts the R&R errs by failing to apply
judicial estoppel to the Defendants’ representations before the DOL
on the fourth Motion for Partial Summary Judgment.
Mr. Wetch argues the R&R discussed defendants’ responses to plaintiff’s

first and third motions for partial summary judgment before the DOL but not
the fourth motion for partial summary judgment. (Docket 137 at p. 23).
Plaintiff submits defendants’ response to the fourth motion was made five
months after receiving Mr. Wetch’s medical records in November 2017
concerning the 2010 fall. Id. In plaintiff’s view “Defendants[] had the medical
records for months before they admitted to the DOL that the care [addressed in
the fourth motion] was compensable.” Id. (emphasis omitted; referencing
Docket 65 at p. 2 ¶ 7). Plaintiff notes in defendants’ March 1, 2018, response
filed with the DOL they stated among other things:
Without prejudicing the right to contest future medical treatment
and medical care pursuant to SDCL 62-7-33, Employer and Insurer
have previously represented that Claimant will be provided the
necessary and reasonable care as set forth on Form 485 [life care
plan] . . . .
Per Form 485, Claimant needs supervised living services with a livein aid in a modified dwelling. Employer and Insurer have an
obligation to implement and effectuate the necessary, reasonable
and appropriate accommodations for Claimant, and Employer and
Insurer will do so. . . .
To a significant extent, the medical benefits to which Claimant is
entitled have been provided. To the extent there are medical
benefits to which Claimant is entitled but which have not yet been
provided to Claimant, such benefits will be provided.
53

Id. (citing Docket 80-5 at pp. 1-3). Mr. Wetch contends the DOL “accepted
Defendants’ admissions.” Id. (referencing Docket 44-20).25
Mr. Wetch argues “[t]he Defendants[] cannot be allowed to take an
inconsistent position now, based on the suggestion that they should have
taken a different position before the DOL in 2018, after they obtained [the
2010] medical records.” Id. at pp. 23-24 (emphasis omitted). Mr. Wetch
submits “[t]he danger of an inconsistent result exists because the jury might
conclude that the DOL was wrong or that the DOL was misled by the
admissions in 2018.” Id. at p. 24 (emphasis omitted; referencing Hayes, 853
N.W.2d at 883). Plaintiff contends the R&R’s “analysis is factually and legally
defective because it fails to apply judicial estoppel to the arguments and
admissions of the Defendants in response to the Fourth Motion for Partial
Summary Judgment.” Id.
Defendants’ response contends judicial estoppel should not apply to their
2018 submission to the DOL or the DOL’s April 2018 order because defendants
were “unaware Wetch had suffered the catastrophic fall in 2010[.]” (Docket

25Following

an April 18, 2018, hearing on Mr. Wetch’s fourth motion for
partial summary judgment, the DOL’s order addressed defendants’
representations. “At the hearing, Employer/Insurer provided no explanation
as to why it has delayed payments for necessary treatments to this point, only
that it promised to pay outstanding medical bills at some unspecified date in
the future. The Department finds there is no dispute in this case and
Claimant is entitled to partial summary judgment on this issue.” (Docket 4420 at pp. 5-6).
54

144 at p. 23 n.23 (referencing State v. St. Cloud, 465 N.W.2d 177, 180 (S.D.
1991)).
The R&R addressed plaintiff’s third motion for partial summary judgment
before the DOL and agreed with defendants’ argument. “There are significant
facts which came to light after defendants’ admission of liability for the four
items such that judicial estoppel should not apply.” (Docket 131 at p. 50).
The same logic applies to the court’s analysis of Mr. Wetch’s fourth
motion for partial summary judgment before the DOL. Defendants’ response
to plaintiff’s fourth motion for partial summary judgment may well have been
the result of mistake or inadvertence. St. Cloud, 465 N.W.2d at 180. As with
the earlier DOL rulings, this federal case should be stayed and defendants
required to exhaust their administrative remedies under SDCL § 62-7-33.
Lagler, 2012 WL 3264906, at *2.
Because of the ultimate decision in this order, the court does not mean
to suggest the DOL must adopt defendants’ argument regarding the physicians’
opinions or the impact of the 2010 medical records. The DOL remains free to
resolve the parties’ arguments on remand.
Plaintiff’s eighth objection to the R&R is overruled.
16.

Plaintiff’s sixth objection asserts the R&R errs by failing to
distinguish between the [DOL’s] orders’ “effectiveness,”
“appealability,” and “finality.”
The R&R declined to apply res judicata as a mechanism to grant

plaintiff’s partial summary judgment motion. (Docket 131 at p. 43). Mr.
55

Wetch argues the R&R is in error because “decisions of the DOL are effective
ten days after the Defendants received them, even if the Defendants’ disagreed
with them.” (Docket 137 at p. 17) (referencing SDCL § 1-26-32). Because
defendants did not move for “a stay of any of the underlying decisions of the
DOL,” Mr. Wetch contends those decisions “are effective, whether they are final
or not.” Id. (emphasis omitted). Plaintiff submits the rationale of the R&R
“impl[ies] that Defendants did not need to obey the orders, either objectively or
subjectively, because Defendants hope to challenge them in the future.”26 Id.
at p. 18.
One of the principle reasons the magistrate judge concluded res judicata
should not apply to the decisions of the DOL is because “it is obvious from the
DOL’s May 7, 2018, decision that the DOL continues to exercise jurisdiction
over Mr. Wetch’s petition and that the petition has not been finally disposed of
by the DOL.” (Docket 131 at pp. 38-39) (referencing Docket 44-20 at p. 8). In
its May 201827 order the DOL declared:
Employer/Insurer has provided no justification for failing to comply
with its obligations under the 1994 agreement. However, the
26Mr.

Wetch objects to the R&R considering the opinions of two of
defendants’ expert witnesses. (Docket 137 at p. 19). Defendants assert its
expert witnesses never “ ‘instructed’ it to ‘disobey a court order’ . . . [and
defendants have] not even asserted advice of counsel as an affirmative
defense.” (Docket 144 at p. 21 n.11) (brackets omitted). The R&R rejected
the experts’ conclusions in resolving the statute of limitations issue. (Docket
131 at pp. 52-55). Plaintiff’s collateral objection to the R&R is overruled.
27The

parties agree 2015 on Docket 44-20 is a typographical error and
the correct year is 2018.
56

Department
does
not
have
the
authority
to
compel
Employer/Insurer to abide by the terms of the agreement. The
Department’s jurisdiction over this case is based upon Claimant’s
2014 petition to enforce the agreement. Though, it is unclear on
what basis the Department could reassert jurisdiction from the 1994
agreement short of a petition alleging a change in condition under
SDCL 62-7-33. Nonetheless, should the Claimant wish to dismiss
his petition, the Department will relinquish jurisdiction so that the
circuit court may assume it.
Claimant’s Motion for Partial
Summary Judgment is GRANTED.
Claimant’s motion for
sanctions is DENIED. This letter shall constitute the order of the
department on this matter.
(Docket 44-20 at p. 8). The court agrees with the conclusion of the R&R that
“the language of the DOL’s last order in Mr. Wetch’s case makes clear that it is
not a final order and that his petition remains pending. . . . [T]he DOL’s order
upon which Mr. Wetch wishes to base his claim of res judicata is not a final
order.” (Docket 131 at pp. 41-42). In arriving at this decision, the court
wants to make clear that it in no way finds the defendants are free ignore the
orders of the DOL. SDCL §§ 1-26-30, 1-26-32 and Jundt, supra.
Plaintiff’s sixth objection to the R&R is overruled.
17.

Plaintiff’s ninth objection claims the R&R errs by failing to apply
res judicata, collateral estoppel, or judicial estoppel to the
decisions and payments of the Subsequent Injury Fund.
Mr. Wetch argues the R&R “entirely fails to consider the preclusive

effects of res judicata, collateral estoppel, and judicial estoppel . . . in light of
the Defendants’ proceedings before the Subsequent Injury Fund [“SIF”] in the
1990’s or with respect to the 2018 requests for reimbursement for payments
made from 2011 to 2018.” (Docket 137 at p. 24). Plaintiff contends that “[i]f
57

the Defendants believed in 2018 that Mr. Wetch’s condition were [sic] not
compensable, they failed to make that disclosure to the SIF.” Id. at p. 25.
Instead, he argues “Defendants . . . received full reimbursement from the SIF.”
Id. (referencing Docket 112-3).
Defendants’ response asserts plaintiff “failed to present this issue to the
magistrate judge . . . and seeks to rely on new evidence in support of this claim
now.” (Docket 144 at p. 26) (referencing Dockets 60 & 111; other reference
omitted). Defendants argue “[t]he court should refuse to consider Wetch’s new
argument regarding the subsequent injury fund.” Id. “Even if the court were
to consider Wetch’s new argument,” defendants assert their “alleged
‘representations’ to the subsequent injury fund ‘in 2018’ are irrelevant to the
questions of whether it acted in bad faith in 2012.” Id. Defendants contend
“[t]he 2018 subsequent injury fund claim was made after [defendants] had
already paid benefits to Wetch based on Wetch’s representations the benefits
were compensable. Wetch is not entitled to apply a negative inference to
[defendants] created by his own action.” Id. (emphasis omitted).
Defendants’ first response to plaintiff’s objection is without merit. In his
reply brief, Mr. Wetch argued:
Recently, Defendants received a 100% reimbursement from the SIF
Fund for the payments they have made for medical benefits to Wetch
for medical care from May 16, 2011 to May 3, 2018. . . . Defendants’
arguments that medical care was not compensable during this
period contradicts their representations before the SIF Fund, when
requesting reimbursement for these payments. The SIF fund
accepted the Defendants representations. Therefore, Defendants’
58

arguments are barred by judicial estoppel. . . . Defendants are
seeking to pervert the judicial machinery through contradictory
representations to this Court and the SIF Fund. The Defendants
cannot claim that the reimbursed payments were not compensable
in the first place.
(Docket 111 at p. 13 n.6).
Defendants’ second response is similarly without merit. Defendants did
not pay benefits to Mr. Wetch based on his representations but rather on
defendants’ evaluation of the evidence and conclusion there was no basis for
challenge under whatever statutory plan they felt was applicable to the original
submitted claims. Defendants applied to the SIF for reimbursement of claims
paid during the period 2011 through 2018. (Docket 112-2). According to
documentation from the DOL, Division of Insurance, defendants were
reimbursed $143,975.16 from the SIF for claims in Mr. Wetch’s case. (Docket
112 at p. 3).
Mr. Wetch is not seeking to assert res judicata based on his conduct but
rather based on defendants’ decision to seek reimbursement from the SIF for
payments made on plaintiff’s medical claims. Defendants cannot have it both
ways. They may not now challenge Mr. Wetch’s right to benefits for past
medical care claims and yet retain the reimbursement from the SIF for those
same claims. Mr. Wetch is not claiming bad faith on defendants’ activities
with the SIF, but rather he is asking the court to prohibit defendants from
taking a position in this federal litigation which is contrary to the position they
asserted successfully with the SIF.
59

The R&R did not mention the SIF or defendants’ reimbursements from
the SIF. While judicial estoppel does not apply to defendants’ conduct, res
judicata under the concept of issue preclusion or collateral estoppel does.
Plaintiff’s ninth objection is sustained.
18.

Plaintiff’s twelfth objection asserts the R&R fails to evaluate the
defendants’ denials of benefits given the facts and law available to
the Defendants “at the time” of the denial, delay, or failure to
process or pay.
Mr. Wetch argues the R&R “fails to apply the law of bad faith that the

denial and determination must be made by the facts and law available to the
Defendants ‘at the time’ of the denial.” (Docket 137 at p. 28) (referencing
Docket 131 at pp. 49-50 & 58-60). Plaintiff asserts information later acquired
by the defendants “is immaterial to the bad faith analysis, particularly in light
of Defendants’ admissions to the DOL and SIF in 2018.” Id. (emphasis
omitted). Mr. Wetch argues “[s]ummary judgment should have been entered
on this basis, not withheld because of after acquired evidence which only the
DOL can hear and address.” Id. (referencing Celotex Corp., 514 U.S. 300).
Plaintiff contends the R&R excused “Defendants’ actions, based on the
Defendants’ stated desire to appeal, which they have not pursued, and
arguments regarding a 2010 fall, which for whatever reason, the Defendants
claim not to have had at that time.” Id. at pp. 28-29 (referencing Docket 131
at p. 60). Mr. Wetch submits the court “cannot hear these arguments until

60

the Defendants exhaust their administrative remedies and obtain a ruling in
their favor.” Id. at p. 29 (emphasis omitted).
Mr. Wetch argues the R&R “errs by failing to apply the ‘mend the hold’
doctrine. The Defendants[] are now trying to change the basis for the denial,
from Dr. Wojciehoski’s opinions regarding cerebral palsy, to new arguments
regarding a 2010 fall, in violation of the ‘mend the hold’ doctrine.” Id.
(emphasis omitted; referencing Pfeifer v. Sheehan, 216 N.W. 349, 350 (1927);
Shawver v. Ewing, 1 F.2d 423, 426 (8th Cir. 1924); other references omitted).
Defendants argue “[n]othing alleged in Wetch’s objections changes the
uncertainty that shrouds the potential effect of the April 2010 fall on Wetch’s
then current condition or of the doctors’ opinions of that condition.” (Docket
144 at p. 29). Defendants submit the R&R “appropriately rejects Wetch’s
invitation to ignore the potential impact of the April 2010 fall; the court should
similarly reject Wetch’s objection on the same basis.” Id.
The expressed reason the magistrate judge considered defendants’
subsequently learned information about the 2010 fall was to determine
whether it was appropriate to invoke the res judicata doctrine to grant partial
summary judgment in plaintiff’s favor. (Docket 131 at p. 50).
Mr. Wetch is correct that “it is for the court of first instance to determine
the question of the validity of the law, and until its decision is reversed for error
by orderly review, either by itself or by a higher court, its orders based on its
decision are to be respected.” Celotex Corp., 514 U.S. at 313 (internal
61

quotation marks and brackets omitted). The court intends to respect the
decisions of the DOL but until the questions raised by defendants are resolved
by the DOL, the court does not intend to invoke res judicata to bind defendants
to those prior administrative admissions and decisions. It will be for the DOL
to determine whether defendants are attempting to “mend [their] hold.”
Pfeifer, 216 N.W. at 350.
Plaintiff’s twelfth objection is overruled.
19.

Plaintiff’s fifteenth objection asserts the R&R fails to consider the
legal implications of Defendants’ Motion to Dismiss the
proceedings before the Circuit Court.
Mr. Wetch argues that after briefing was complete, but before issuance of

the R&R, defendants “sought and obtained a dismissal of the second order to
show cause before the Circuit Court.” (Docket 137 at p. 32) (referencing
Docket 124-2). Plaintiff asserts “[i]n seeking this dismissal, the Defendants
represented [to the Circuit Court] that they would provide additional benefits.”
Id. (referencing Docket 122-3). Like in Hayes, Mr. Wetch contends “the
Defendants should be judicially estopped from contradicting their admissions
to the Circuit Court regarding compensability, which formed a basis for the
dismissal.” Id. (referencing Hayes, 853 N.W.2d at 882-84). Because of their
representations before the Circuit Court “in order to obtain the relief they
sought,” Mr. Wetch argues defendants’ “counter-arguments to the Motion for
Summary Judgment, regarding a 2010 injury or other factual bases for

62

dispute, should be estopped[.]” Id. Defendants’ response to plaintiff’s
objections does not address plaintiff’s fifteenth objection. (Docket 144).
In fairness to the magistrate judge, the documents relating to this
objection were not specifically identified in CM/ECF as associated with
plaintiff’s motion for partial summary judgment. Instead, the documents were
attached to the parties’ briefing relating to defendants’ motion seeking leave to
supplement the record with authenticated expert reports. See Dockets 113,
119 & 121-124. The magistrate judge specifically referenced one of
defendants’ experts in the R&R. (Docket 131 at p. 52). Two days after filing
the R&R, the magistrate judge entered an order granting defendants’ motion to
supplement the record. (Docket 132). Against this background, the court
believes the magistrate judge should have considered the state circuit court
filings, as well as a March 2019 proceeding before the DOL, both of which were
in the record.
Defendants asked the DOL to reconsider its May 7, 2018, decision
granting Wetch’s fourth motion for partial summary judgment. (Dockets 1213 at p. 4).28 Among the grounds asserted for defendants’ motion for
reconsideration was Mr. Wetch’s alleged failure to disclose the 2010 fall. Id. at
p. 6.

28Defendants

filed the DOL decision and then filed the same order eight
days later. Compare Docket 121-3 and 124-1.
63

On March 7, 2019, the DOL issued a letter decision and order denying
defendants’ motion for reconsideration or, in the alternative, for relief pursuant
to SDCL 15-6-60(b). Id. at pp. 4-5. Because defendants paid all of Mr.
Wetch’s benefits claims, the DOL denied defendants’ motion for reconsideration
as moot. Id. DOL reminded defendants if Mr. Wetch’s assertions for benefits
were fraudulent they should “request a formal investigation under SDCL 62-447[,]” and if his claims for future benefits “are inaccurate [they] may allege a
change in condition under SDCL 62-7-33.” Id. at p. 6. As of March 2019,
defendants had not taken either avenue of action. Id.
Mr. Wetch filed a second motion to show cause for contempt in state
court. See Docket 122-2 ¶ 8. Both parties filed documents with the state
circuit court between February and April 2019. See Dockets 122-1 through 3
and 124-2. In their response, defendants represented to the state court they
had paid for the two items which were the subject of the second show cause
proceedings, namely, Mr. Wetch’s transportation and dwelling modifications
claims. (Docket 122-1 at p. 3). During a March 25, 2019, hearing,
defendants’ counsel represented to the court “Mr. Wetch needs assistance and
Crum & Forster has indicated it plans to provide that assistance.” (Docket
122-3 at p. 9:11-13). Defense counsel further represented that “Crum &
Forster has committed to doing what’s been recommended.” Id. at p. 10:1617. Based on those representations the state court judge orally granted
defendants’ motion to dismiss. Id. at p.10:24-25. On April 4, 2019, the state
64

court entered an order granting the defendants’ motion to dismiss Mr. Wetch’s
second motion to show cause for contempt. (Docket 124-2).
Both of these post-briefing actions convince the court defendants have
been avoiding returning to the DOL and seeking to reopen Mr. Wetch’s earlier
claims, which are the basis of his bad faith cause of action, either as
fraudulent (for failing to disclose the 2010 fall) under § 62-4-47 or as neither
reasonable nor necessary medical care (because of the intervening 2010 fall)
under § 62-7-33. Instead, defendants continue to pay for Mr. Wetch’s care,
thereby keeping themselves in good standing with the DOL and the state
circuit court, but using the lack of finality before the DOL as a basis for
resisting plaintiff’s bad faith claim. Defendants are barred from “pervert[ing]
the judicial machinery,” by arguing positions inconsistent with the DOL, the
state court and this court. Hayes, 853 N.W.2d at 882-84.
Plaintiff’s fifteenth objection is granted in part and denied in part.
FINALITY OF THE DOL CASE
It is true that in a workers’ compensation setting “one of the elements of
the bad faith claim is a final judgment in South Dakota worker’s compensation
proceedings in favor of the claimant.” Harms v. Cigna Ins. Cos., 421 F. Supp.
2d 1225, 1229 (D.S.D. 2006) (referencing Zuke v. Presentation Sisters, Inc.,
589 N.W.2d 925, 930 (S.D. 1999). “Thus, the claim accrues upon entry of
‘final judgment from the department of labor,’ including all appeals, in the
worker’s compensation proceedings.” Id. (referencing Brennan v. Western
65

National Mutual Ins. Co., 125 F. Supp. 2d 1152, 1155 (D.S.D. 2001). See also
Lagler, 2012 WL 3264906, at *3 (“Only after the administrative procedures
established under the workers’ compensation statutes, including appellate
procedures, have produced a decision on Lagler’s underlying entitlement to
benefits will the Court have an administrative decision it can use in
adjudicating Lagler’s bad faith claims.”).
In order to avoid the possibility of any unfair disadvantage to Mr. Wetch,
the court will stay the case until defendants obtain a final decision on Mr.
Wetch’s benefits from the DOL and state courts have exercised their powers of
appellate review. In the event Mr. Wetch obtains a favorable decision, the
court will entertain a motion to lift the stay and proceed with plaintiff’s case.
ORDER
For the reasons given above, it is
ORDERED that defendants’ objections (Docket 136) to the report and
recommendation are sustained in part and overruled in part.
IT IS FURTHER ORDERED that plaintiffs’ objections (Docket 137) to the
report and recommendation are sustained in part and overruled in part.
IT IS FURTHER ORDERED that the report and recommendation (Docket
131) is adopted in part, rejected in part and modified in part consistent with
this order.
IT IS FURTHER ORDERED that plaintiff’s motion for partial summary
judgment (Docket 59) is denied.
66

IT IS FURTHER ORDERED that this case is stayed until defendants have
obtained a final determination from the South Dakota Department of Labor,
Division of Labor and Management, and the courts of the State of South
Dakota exercising their powers of appellate review of workers’ compensation
cases.
IT IS FURTHER ORDERED that defendants shall commence proceedings
before the South Dakota Department of Labor, Division of Labor and
Management, as required by this order on or before March 27, 2020.
Dated February 25, 2020.
BY THE COURT:
/s/ Jeffrey L. Viken
JEFFREY L. VIKEN
UNITED STATES DISTRICT JUDGE

67