Kugler v. LexisNexis Occupational Health Solutions Inc

Filing 55

ORDER granting 36 Motion to Seal Document (as the document in question is a confidential settlement agreement) and DENYING 32 MOTION for Summary Judgment Using Fast Track Summary Judgment Procedures, signed by Chief Judge William C Griesbach on 04/22/2014. The clerk will place the case on the calendar for a telephonic scheduling conference. (cc: all counsel) (Griesbach, William)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
NANCY KUGLER,
Plaintiff,
v.

Case No. 12-C-840

LEXISNEXIS OCCUPATIONAL
HEALTH SOLUTIONS, INC.,
Defendant.

DECISION AND ORDER

In this tort action brought under diversity jurisdiction, Defendant LexisNexis Occupational
Health Solutions, Inc. has filed a motion for summary judgment. In short, it argues that a release
and settlement signed by Plaintiff Nancy Kugler bars this action. For the reasons given below, the
motion will be denied.

I. Background
In 2010 Plaintiff was employed by Aurora and participated in a random drug test as a part
of her employment. The drug test was conducted by ACL Services, Inc., a subsidiary of Aurora.
ACL found that Plaintiff’s urine sample contained dihydrocodeine, a controlled substance in the
codeine family. Although ACL is an Aurora company, drug tests are reviewed by independent
medical review officers (MROs), independent physicians whose role is to ensure the integrity of the
drug testing process. Defendant LexisNexis is an organization offering independent MRO services,
and ACL sent the results to LexisNexis for confirmation. LexisNexis reviewed the results and then

confirmed its findings that Plaintiff’s urine had tested positive for dihydrocodeine. When Aurora
learned of the results, it immediately terminated Plaintiff’s employment.
Eventually Plaintiff got LexisNexis to send her sample to another lab, which found the
sample to contain hydrocodone (for which Plaintiff had a prescription) but not dihydrocodeine.
Even so, for reasons not in the record, Aurora did not hire her back. Eventually Plaintiff sued
Aurora and ACL, and the parties entered into a settlement and release agreement. LexisNexis,
which was not a party to that agreement, now wishes to enforce the agreement’s terms to bar
Plaintiff’s lawsuit against it.

II. Analysis
Summary judgment is proper if there are no genuine issues of material fact and the moving
party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a).
A. Res Judicata
LexisNexis argues that the settlement agreement and subsequent court judgment are res
judicata that may not be disturbed with the filing of a new lawsuit. The dispute centers on the
meaning of the terms of the parties’ settlement agreement. Although LexisNexis was not party to
the agreement, it relies on the clause that defines Aurora (which was party to the agreement) as
including “Aurora Health Care, Inc. and any of its present, former and future owners, parents,
affiliates and subsidiaries, and all of its and their employees, agents, servants, representatives . . . .”
(ECF No. 37, ¶ 5.) As the independent medical review officer services company, LexisNexis argues
that it was Aurora’s “agent” and was thus included within the definition of “Aurora.”

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1. “Agent” is Not Ambiguous
The first question is whether the term “agent” is ambiguous. If the term is ambiguous, then
a court may look to extrinsic evidence—evidence outside the contract itself—to discern its meaning.
Nature Conservancy of Wis., Inc. v. Altnau, 2008 WI App 115, ¶ 6, 313 Wis.2d 382, 756 N.W.2d
641 (Wis. 2008). Specifically, Plaintiff wants the court to consider the fact that LexisNexis was
never a party to the release negotiations; that it has no financial relationship with Aurora; and that
the parties to the agreement never intended that LexisNexis would have been covered by the
agreement. In addition, there is no evidence in the record that LexisNexis gave any consideration
either to Kugler or to Aurora. If enforceable, the release is a very valuable instrument, and so it is
unclear why LexisNexis would be entitled to receive such a large benefit from arms’-length parties
when it did not pay anything for that benefit. All of these factors could be suggestive of the
contracting parties’ intent that LexisNexis was not to be included within the release.
Agents and agency are terms commonly used in the law, but the definition of the word
“agent” does not always lend itself to an obvious application, in part because the concept of agency
is a broad one. One may be an agent with respect to some matters but not others; one may be an
independent contractor agent or a servant agent; and some agents are actually called agents while
most operate under other titles. Arsand v. City of Franklin, 83 Wis. 2d 40, 47, 264 N.W.2d 579,
583 (1978). Thus, in one case the Wisconsin Court of Appeals had little trouble concluding that
a statute’s use of the term “agent” was ambiguous. Kettner v. Wausau Ins. Companies, 191 Wis.
2d 723, 733, 530 N.W.2d 399, 403 (Wis. Ct. App. 1995) (“because this term has more than one
meaning, we conclude that the meaning of agent as used in § 893.80 is ambiguous.”)

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In another case, however, upon which LexisNexis relies heavily, the court of appeals found
no ambiguity in a release that used the term “agent.” In Wagner v. Hicks, the Wagners sued Dr.
Hicks for veterinary malpractice after their cows experienced health problems. 163 Wis.2d 1094,
474 N.W.2d 529 (Wis. Ct. App. 1991). Previously, they had sued Germania Automated Dairy
Systems, alleging that problems with Germania’s milking equipment had caused the health
problems. In settlement of that dispute, plaintiffs signed a release waiving any claims against
Germania and its agents. Dr. Hicks had been retained by Germania to provide veterinary services
to the plaintiffs’ cows, and “Hicks and Germania's general manager submitted affidavits agreeing
that all of Hicks's services were provided at Germania's request and that Germania ‘retained the
right to authorize or not authorize the extent to which Dr. Hicks performed testing, culturing and
treatment of the Wagner herd.’” Id. at *1. In addition, “Germania did authorize and approve the
testing, culturing and treatment that was performed for Dr. Hicks for the Wagner herd.” Id. Based
on this evidence, the court concluded Dr. Hicks was Germania’s agent and thus entitled to invoke
the release against Germania and its agents. In doing so, it poured cold water on the suggestion that
the term “agent” was ambiguous: “The Wagners also contend that they never intended to have their
release of claims extend to independent contractors such as Hicks. Independent contractors are
agents, however, if the test cited above is satisfied. . . . The Wagners cannot rely on their
misunderstanding of the term ‘agent’ to introduce an ambiguity into their liability release form.” Id.
at *2.
I conclude that although the term “agent” is broad and therefore subject to a number of
interpretations, that is not enough to render it ambiguous. In some cases parties deliberately draft
broad terms into contracts (e.g., “best efforts” or “of the essence”) with the expectation that,
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although the contours of the term are not perfectly definable at the time of signing, the term can be
applied based on facts that develop later. Here, when signing the agreement, no one knew how
many agents Aurora might have, or what kind of agents they might be. What they did know (if they
considered the question at all) was that Aurora’s agents—in whatever capacity they served—would
enjoy the benefits of the release. The fact that the term is broad does not make it ambiguous, as the
court in Wagner held under similar facts. The question of whether one person is an agent of another
is something that is frequently litigated because it can often be a fact-intensive inquiry. However,
even if the question of whether someone is an agent is sometimes difficult, that does not mean that
the term “agent” itself is ambiguous.
2. LexisNexis was not Aurora’s Agent
Agency is “the fiduciary relationship that arises when one person (a ‘principal’) manifests
assent to another person (an ‘agent’) that the agent shall act on the principal's behalf and subject to
the principal's control, and the agent manifests assent or otherwise consents so to act.”
RESTATEMENT (THIRD ) OF AGENCY § 1.01 (2006). In Wagner, supra, the court applied these factors
in determining whether Dr. Hicks was Germania’s agent. Having concluded that the term “agent”
was unambiguous, the court concluded that Dr. Hicks was indeed an agent, which entitled him to
coverage by the release.
Dr. Hicks’ relationship with Germania contrasts sharply with the relationship between
LexisNexis and Aurora, however. Specifically, the Wagner court found it important that Germania
retained control over how Dr. Hicks conducted his medical care of the herd. “Over several months
Hicks repeatedly visited the Wagner farm, usually accompanied by a Germania representative. In
the course of these visits, he prescribed the medication [at Germania’s direction] that led to this
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lawsuit.” Id. at *1. Germania controlled the treatment Dr. Hicks provided and even accompanied
him on his visits to the farm. Thus, it was relatively easy to conclude that he was an “agent”
because Germania paid him, directed him, and controlled his work.
Here, by contrast, the entire purpose of using a third-party medical review officer is to avoid
that level of control. The MRO is intended to be a neutral, independent party who safeguards the
legitimacy of the testing process to ensure that the results are not colored by either side and to
protect the employee’s medical information from the employer. The MRO might be paid by one
party, but that party, by definition and design, exercises no control over the agent’s work apart from
whatever the standard industry expectations and contracts provide for medical review. That is, the
MRO is expected to perform standard MRO services—a scope of work—but does so without his
actual duties being controlled in any way by the payor. The party who hires the MRO cannot direct
the medical officer’s work or even inquire about the medical information the MRO finds once the
process has begun. In fact, independence from the lab or the employer is the key purpose of the
MRO role and is listed first in the Department of Transportation’s regulations: “As an MRO, you
have the following basic responsibilities: (a) Acting as an independent and impartial ‘gatekeeper’
and advocate for the accuracy and integrity of the drug testing process.” 49 C.F.R. § 40.123. Thus,
by design, neither Aurora nor ACL could exercise any kind of meaningful control over LexisNexis.
This is confirmed by the declaration of Barbara Bigler, president of ACL (the testing lab), who
stated that Aurora did not even have a written contract with LexisNexis, much less any control over
it. “Aurora has no control over LexisNexis’ employees or its MROs, nor does it have any control

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over how LexisNexis conducts its reviews or analyses of drug test results including the means,
manner, or technology implemented.”1 (ECF No. 44 at ¶ 7.)
An MRO is in many ways no different from an arbitrator or referee. Although an arbitrator
might be paid by one or both parties to a dispute, and although his decision is controlled by the
questions the parties pose and other rules of arbitration, it would be a stretch to consider the
arbitrator an “agent” of either of the parties. The very reason he is hired is that the parties desire
a fair and independent process rather than a process subject to control or influence by one or more
parties. Just as one party cannot call up an arbitrator ex parte to seek favorable treatment, neither
the employer nor employee can meddle with the medical review process conducted by the MRO.
That medical review officers are not agents is supported by release clauses culled from other
cases. For example, in Mayfield v. National Ass'n for Stock Car Auto Racing, Inc., stock car driver
Jeremy Mayfield sued NASCAR and a testing lab after testing positive for a banned substance. In
connection with his racing career, Mayfield had signed a release containing the following clause:
I HEREBY RELEASE, DISCHARGE, COVENANT NOT TO SUE, AND AGREE
TO HOLD HARMLESS NASCAR, its officers, employees, directors, agents, and
such testing facilities and Medical Review Officers as NASCAR retains or selects
in connection with implementation of this Policy, . . . arising out of the
implementation of the Policy, or any act or omission in connection therewith,
including and without limitation, the testing of specimens and the publication of the
test results and circumstances giving rise to such test or tests to any third party or
parties by NASCAR or said testing facilities or said Medical Review Officers, as
well as the officers, employees, and agents of each of them, or any other person or
entities.
674 F.3d 369, 373-374 (4th Cir. 2012) (emphasis added).
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LexisNexis argues that Bigler would not be in a position to know about Aurora’s level
of control. My analysis does not turn on Bigler’s testimony. Even so, I note that Aurora is even
one more step removed from the process than ACL is. ACL was the party that sent the lab work
to LexisNexis.
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Similarly, in McCown v. Gray Kentucky Television, Inc., 295 S.W.3d 116, 118 (Ky. Ct. App.
2008), the plaintiff signed a release stating: “I hereby release and hold harmless the Company, the
medical review officer or other medical professionals, the laboratory, their employees, agents and
contractors from liability arising from this request to furnish this or any specimen or sample . . .”
In both cases the release explicitly names the medical review officer in addition to the employer and
its agents (“and such testing facilities and Medical Review Officers . . .”) rather than lumping them
in under the catch-all term “agent.” Although other parties’ treatment of the issue is certainly not
dispositive in this case, such releases suggest at a minimum that the lawyers drafting those releases
did not consider MROs to be agents of the employer.
In sum, because one of the key roles of medical review officers is independence from the
employer or the lab, I cannot conclude that LexisNexis was the agent of either of them.2
3. The Settlement Agreement is not a General Release of All Claims
Finally, LexisNexis argues that the settlement agreement constitutes a general release of all
claims that arose out of the testing snafu, regardless of whether it was a party to the agreement or
not. A release may be a general release of all claims, even against non-parties, if that was the
parties’ actual intent. Brown v. Hammermill Paper Co., 88 Wis.2d 224, 233–34, 276 N.W.2d 709
(1979).
In Rebholz v. Lakeland Leisure Corp., the plaintiffs signed a settlement entitled
“RELEASE—IN FULL OF ALL CLAIMS (EXCEPT THOSE EXPRESSLY RESERVED
HEREIN).” 337 Wis.2d 426, 805 N.W.2d 734, 2011 WI App 136, 2011 WL 3444521, *1 (Wis.
2

The fact that various statutes might describe an MRO as a “service agent” does not
change the analysis. The question is whether one meets the legal test for agency, and here
LexisNexis does not.
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Ct. App. 2011). Later, they brought claims against parties who had not signed the release. When
these parties invoked the release, the court found the release to be a general release and thus
dismissed the claims. Among other things, the agreement released all claims not just against the
named parties but against “all other persons, firms, and corporations.” Id. at *4. Given that broad
language, as well as the title of the agreement (releasing “in full of all claims”), it was no trouble
for the courts to find the agreement to be a general release.
Here, the terms of the settlement agreement make it clear that it is not a general release. The
very first sentence of the agreement refers to the cases Kugler filed with the Equal Opportunity
Commission and the Wisconsin Department of Workforce Development. The next sentence cites
the civil action she filed against Aurora and ACL. In reference to these aforementioned actions, the
recitals continue: “WHEREAS, Aurora denies any unlawful discrimination and denies that there
is any validity to the above-referenced administrative actions and lawsuit commenced by Kugler;
and WHEREAS, it is the desire of the parties in the interest of avoiding further proceedings with
respect to these matters to compromise and finally, fully and completely settle all of Kugler’s claims
in their entirety.” (ECF No. 37 at 1.) Thus, the stated intent of the agreement is to settle claims
arising out of Kugler’s employment and to avoid further proceedings “with respect to these
matters,” i.e., the employment-related matters highlighted in the recitals. (Id.) The rest of the
agreement requires Aurora to pay Kugler and provide a neutral letter of reference, and in return
Kugler will dismiss all charges “which currently are pending against Aurora.” (Id.) Then, in the
release section, the agreement provides that “to the extent permitted by law, Kugler releases Aurora
(as defined below) from, and covenants not to sue Aurora with respect to, any and all claims Kugler
has against Aurora.” (Id. at 2.) It further recites a litany of claims being released: “This release
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includes any and all matters in connection with . . . acts of disability discrimination, discrimination
for use of a lawful product, retaliation, suspension, discharge, [etc.] . . . allegedly committed against
Kugler by Aurora.” (Id.) Finally, the agreement stipulates that “If Kugler brings an action against
Aurora in violation of this release . . . Kugler agrees that prior to the commencement of such an
action she will tender back to Aurora all payments made to Kugler as consideration for this release.”
(Id. at 2-3.)
Wherever possible, the release clearly indicates that the claims being released are those that
were brought against Aurora, not all claims that might ever be brought against everyone. The
agreement further makes clear that the operative limiting principle is the contract’s definition of
“Aurora,” which, as noted above, includes its employees, directors, subsidiaries and “agents.”
Notably, the very clause upon which LexisNexis relies (deeming itself Aurora’s “agent”) would be
rendered superfluous if the agreement were truly a general release of all claims against all persons.
In sum, the contract is clear that it is a merely release of all claims against Aurora, as defined in the
agreement.
Although the language of the contract is clear, it is noteworthy that there is no indication that
Kugler received anything in compensation as a result of releasing claims against non-Aurora
entities. In Rebholz the court noted that “we may consider factors such as whether Rebholz has
received ‘full satisfaction, or that which the law must consider as such,’ in determining the nature
and scope of the release . . . . In other words, the difference between the amount of damages
Rebholz actually sustained and the sum paid by State Farm under the terms of the release is relevant
to determine whether the amount received was intended to be and was in fact received in full
satisfaction of the wrong.”

2011 WL 3444521, *3 (citation omitted). As suggested earlier,
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LexisNexis is asking a court to construe a document in its favor when it never apparently gave any
consideration in exchange for such favorable treatment. Although not dispositive, it suggests that
LexisNexis is merely trying to receive a windfall rather than attempting to enforce an agreement it
actually had a concrete interest in.

III. Conclusion
For the reasons given above, the motion for summary judgment is DENIED. The motion
to seal is GRANTED, as the document in question is a confidential settlement agreement. The
document will remain under seal. The clerk will place the case on the calendar for a telephonic
scheduling conference.
SO ORDERED this

22nd

day of April, 2014.

s/ William C. Griesbach
William C. Griesbach, Chief Judge
United States District Court

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