IN THE SUPREME COURT OF CALIFORNIA
CAROLYN CLAXTON,
Plaintiff and Appellant,
S106106
v.
Ct.App. 2/8 B141129
RAY WATERS et al.,
Los Angeles County
Defendants and Respondents. )
Super. Ct. No. NC 024284
In executing the standard preprinted form used to settle workers’
compensation claims, does an injured worker also release causes of action that are
not exclusively subject to the workers’ compensation law or are not within the
scope of that law? The answer is “no.” Those causes of action, however, may be
the subject of a separate settlement and release.
I
From February 1995 until her resignation in September 1997, Carolyn
Claxton worked as an office assistant for defendant Pacific Maritime Association
(PMA). Claxton’s supervisor was Ray Waters.
On December 16, 1997, Claxton filed a claim with the Workers’
Compensation Appeals Board (WCAB) against PMA for an injury to her “left
lower extremity and psyche” from a slip and fall on May 7, 1997. On January 16,
1998, Claxton filed a second and separate workers’ compensation claim against
PMA for injury to “psyche due to sexual harassment.”
1
On September 15, 1998, Claxton filed this civil action against PMA and
Waters alleging, as relevant here, sexual harassment in violation of the Fair
Employment and Housing Act (Gov. Code, § 12900 et seq.). On November 6,
1998, defendants filed their answer to the complaint.
On February 25, 1999, Claxton and PMA settled the workers’
compensation claims for $25,000. As part of the settlement, Claxton executed a
preprinted compromise and release form (WCAB form 15). The use of this form
is mandatory. (Cal. Code Regs., tit. 8, § 10874.) The form had only the case
numbers for Claxton’s two claims for workers’ compensation; it made no
reference to the pending civil action against PMA and Waters.
In preprinted paragraph 3, WCAB form 15 states: “Upon approval of this
compromise agreement by the Workers’ Compensation Appeals Board or a
workers’ compensation judge and payment in accordance with the provisions
hereof, said employee releases and forever discharges said employer and insurance
carrier from all claims and causes of action, whether now known or ascertained, or
which may hereafter arise or develop as a result of said injury, including any and
all liability of said employer and said insurance carrier and each of them to the
dependents, heirs, executors, representatives, administrators or assigns of said
employee.”
On March 16, 1999, a workers’ compensation judge approved the
compromise and release. The order approving the settlement contained the case
numbers for both of Claxton’s workers’ compensation claims, but not the case
number for the civil action.
Thereafter, in the civil lawsuit alleging sexual harassment, defendants PMA
and Waters moved in the superior court for leave to file an amended answer
adding, among other things, an affirmative defense that the execution of the
workers’ compensation compromise and release also extinguished Claxton’s
2
claims in her civil action against PMA and Waters. The court granted the motion.
Claxton then moved for summary adjudication of, among other things, the
affirmative defense.
In support of that motion, Claxton submitted declarations by herself and by
the attorney who had represented her in the workers’ compensation proceedings.
Claxton’s declaration stated that she thought the workers’ compensation release
related only to her knee injury “and did not include” her claim for damages in the
civil action alleging sexual harassment by her “employer,” that the preprinted
workers’ compensation release form said nothing about the settlement of her civil
action alleging sexual harassment, and that she had not authorized her workers’
compensation attorney to settle her civil action.
The declaration of Claxton’s workers’ compensation attorney stated that the
workers’ compensation settlement was intended to cover only plaintiff’s knee
injury claim “and did not include the applicant’s claim for civil damages for
injuries as a result of the sexual harassment which is the subject of her civil action
against her employer . . . .” The declaration pointed out that the preprinted release
form had no reference to the pending civil action for sexual harassment, and said
Claxton had not authorized settlement of the civil lawsuit by means of the
workers’ compensation compromise and release.
While Claxton’s motion was pending in the superior court, defendants
moved for summary judgment, asserting that in executing the workers’
compensation compromise and release form Claxton extinguished any recovery
for emotional distress damages in her civil lawsuit against defendants.
The trial court granted defendants’ motion for summary judgment, took
plaintiff’s motion for summary adjudication off calendar as moot, and awarded
defendants $92,459.75 in attorney fees.
3
After a reversal by the Court of Appeal, we granted defendants’ petition for
review.
II
California’s workers’ compensation scheme was developed early in the
20th century as a result of the inadequacy of the common law that often denied
injured workers any recovery for work-related injuries. (Western Indemnity Co. v.
Pillsbury (1915) 170 Cal. 686, 693; see generally Mathews v. Workmen’s Comp.
Appeals Bd. (1972) 6 Cal.3d 719, 728-734 [describing the history and
development of California’s workers’ compensation law].)
The
workers’
compensation law applies to employee injuries “arising out of
and in the course of the employment” when the statutorily specified “conditions of
compensation concur.” (Lab. Code, § 3600.) Generally, it is the exclusive remedy
for such injuries. (Id., §§ 3600, subd. (a), 3601.) But some claims, including
those based on sexual or racial discrimination or other conduct contrary to
fundamental public policy, are not subject to the exclusivity provisions of the
workers’ compensation law. (City of Moorpark v. Superior Court (1998) 18
Cal.4th 1143, 1155.) Thus, such claims may be the subject of both workers’
compensation proceedings and civil actions. (Id. at p. 1161.) For convenience, we
will here refer to claims “outside” the workers’ compensation system as meaning
claims that are either not within the scope of workers’ compensation law or not
subject to the exclusivity provisions of that law.
Liability under the workers’ compensation law is founded in neither tort
nor contract law. (2 Witkin, Summary of Cal. Law (9th ed. 1987) Workers’
Compensation, § 7, p. 565.) Instead, it is liability without fault (Cal. Const., art.
XIV, § 4; Lab. Code, § 3600; Charles J. Vacanti, M.D., Inc. v. State Comp. Ins.
Fund (2001) 24 Cal.4th 800, 811), to ensure that injured workers are quickly
provided benefits to relieve the effects of the industrial injury (Cal. Const. art.
4
XIV, § 4). Thus, informal rules of pleading apply to such proceedings (Rivera v.
Workers’ Comp. Appeals Bd. (1987) 190 Cal.App.3d 1452, 1456), and workers
may be represented by individuals other than attorneys (Lab. Code, § 5501). Also,
all workers’ compensation statutes are to be liberally construed in favor of the
injured worker. (Id., § 3202; Department of Rehabilitation v. Workers’ Comp.
Appeals Bd. (2003) 30 Cal.4th 1281, 1290.)
To safeguard the injured worker from entering into unfortunate or
improvident releases as a result of, for instance, economic pressure or bad advice,
the worker’s knowledge of and intent to release particular benefits must be
established separately from the standard release language of the form. (Sumner v.
Workers’ Comp. Appeals Bd. (1983) 33 Cal.3d 965, 972-973 (Sumner).) Even
with respect to claims within the workers’ compensation system, execution of the
form does not release certain claims unless specific findings are made. (Lab.
Code, § 4646, subd. (a) [vocational rehabilitation services cannot be settled
without specific findings]; Thomas v. Sports Chalet, Inc. (1977) 42
Cal.Comp.Cases 625 [same]; Rodgers v. Workers’ Comp. Appeals Bd. (1985) 168
Cal.App.3d 567 [potential claim for later injury in rehabilitation program cannot
be released without specific language].)
The concerns just discussed are even stronger when the employer seeks to
apply the standard preprinted workers’ compensation release language to claims
outside the workers’ compensation scheme. Of note here is the Court of Appeal’s
decision in Lopez v. Sikkema (1991) 229 Cal.App.3d 31 (Lopez). There, the
surviving family members of a worker shot and killed by strike breakers hired by
the employer brought a civil lawsuit against the employer and the individuals that
killed the worker, alleging personal injury, wrongful death, conspiracy to violate
civil rights, and violation of civil rights. (Id. at pp. 33-34.) The employer moved
for summary judgment on the ground that the standard workers’ compensation
5
release executed by the family members barred the civil claims arising out of the
worker’s death. The trial court granted the motion.
The Court of Appeal reversed. It noted that there was no evidence that civil
claims were discussed in connection with the workers’ compensation settlement,
and that there was nothing in the record to indicate that the workers’ compensation
judge was aware of the civil action or had sufficient information to determine the
desirability of releasing the civil claims or the adequacy of the compensation for
approving such a release. (Lopez, supra, 229 Cal.App.3d at pp. 36-38.) In the
words of the Lopez court: “If the mandatory compromise and release form
executed by appellants was intended to cover claims which are not compensable
under the workers’ compensation act, it should have contained express language to
that effect.” (Id. at pp. 38-39.)
In
Asare v. Harford Fire Ins. Co. (1991) 1 Cal.App.4th 856 (Asare), the
Court of Appeal took a similar view. There, the worker brought a civil action
against his employer alleging racial discrimination. While that lawsuit was
pending, the plaintiff executed a workers’ compensation compromise and release
form. The trial court granted a defense motion for summary judgment, ruling that
the compromise and release barred the civil action. The Court of Appeal reversed.
The court considered it significant that the parties had separate counsel in the two
proceedings; that the release was negotiated by the workers’ compensation
attorneys; and “perhaps most importantly,” that although the parties’ attorneys
knew of the discrimination cause of action, there was no reference to it in the
workers’ compensation release. (Id. at p. 863.)
In yet another decision, Delaney v. Superior Fast Freight (1993) 14
Cal.App.4th 590 (Delaney), the Court of Appeal rejected an attempt to extend the
workers’ compensation release to bar causes of action outside the workers’
compensation system. There, an employee brought a civil lawsuit against his
6
employer alleging employment discrimination based on sexual orientation. While
the civil action was pending on appeal, the plaintiff worker and the employer
settled his workers’ compensation claim. Thereafter, the employer contended in
the Court of Appeal that the workers’ compensation settlement barred the plaintiff
worker’s civil claim for emotional distress. The Court of Appeal disagreed. It
pointed out that the mandatory compromise and release form used in settling
workers’ compensation claims was “preprinted” and made “no specific reference
to potentially independent civil rights or remedies.” (Id. at p. 599.) Therefore, the
court concluded, “it may reasonably be understood as releasing only those claims
which traditionally fall within the scope of the workers’ compensation system.”
(Ibid.)
While this case was pending before us, yet another Court of Appeal
decision addressed the issue of an employer’s attempt to extend a workers’
compensation release form to bar a civil lawsuit. In that case, Mitchell v. Union
Central Life Insurance Company (2004) 118 Cal.App.4th 1331 (Mitchell) the
employee sued her employer alleging sexual and racial discrimination in violation
of the Fair Employment and Housing Act. She then filed a workers’ compensation
claim alleging work-related injury based on the same conduct as in her civil
lawsuit. While an offer by the employer to settle the civil lawsuit for $1,010,000
was outstanding, the parties settled the workers’ compensation claim for $57,500.
(Id. at p. 1334.) After execution of the workers’ compensation release, the
employer increased to $1,100,000 its offer to settle the civil lawsuit. The plaintiff
rejected the offer. (Id. at p. 1335.) The employer then moved for summary
judgment in the civil action, arguing that the release in the workers’ compensation
proceeding barred the civil action. (Id. at p. 1337.) The trial court granted the
motion. (Id. at p. 1338.)
7
The Court of Appeal reversed. It relied on the decisions of the Courts of
Appeal in Lopez, supra, 229 Cal.App.3d 31, Asare, supra, 1 Cal.App.4th 856, and
Delaney, supra, 14 Cal.App.4th 590. And it quoted this court’s observation in
Jefferson v. Department of Youth Authority (2002) 28 Cal.4th 299, 309 (Jefferson)
that “ ‘the Court of Appeal decisions that have considered the issue have been
consistent in their view that the preprinted language in a workers’ compensation
compromise and release form should be narrowly construed to apply only to
workers’ compensation claims.’ ” (Mitchell, supra, 118 Cal.App.4th at p. 1341.)
In concluding that the evidence left no doubt that the workers’ compensation
settlement was not intended to include the civil claims, the Mitchell court noted
that the plaintiff had different attorneys representing her in the different
proceedings (as here), and that there was no mention in the workers’ compensation
release form of the pending civil lawsuit (as here). (Id. at pp. 1341-1342.)
Defendants insist, however, that in Jefferson, supra, 28 Cal.4th 299, this
court effectively disapproved the Court of Appeal decisions in Delaney, supra, 14
Cal.App.4th 590, and in Lopez, supra, 229 Cal.App.3d 31. They construe
Jefferson as holding that, in the absence of extraordinary circumstances, an
employee’s execution of the preprinted workers’ compensation compromise and
release form, with its standard language releasing “all claims and causes of
action,” also releases claims that fall outside the workers’ compensation system.
We disagree.
In
Jefferson, supra, 28 Cal.4th 299, the preprinted workers’ compensation
compromise and release form had an attachment expressing the parties’ intent to
have the release also apply to the employee’s civil action alleging sex
discrimination. We held that the release did encompass the civil claims. Our
reasons were: (1) the attachment to the workers’ compensation release form
clearly stated the parties’ intent to also settle claims outside the workers’
8
compensation law, and (2) the plaintiff had not offered extrinsic evidence
establishing the parties’ contrary intent. (Id. at p. 304.) That is not the situation
here. There is no attachment to the workers’ compensation release form here.
And, contrary to defendants’ contention, Jefferson did not disapprove the Court of
Appeal decisions in Delaney, supra, 14 Cal.App.4th 590, and in Lopez, supra, 229
Cal.App.3d 31: “[W]e need not consider whether Lopez and Delaney were
correctly decided, and we neither approve nor disapprove their holdings.”
(Jefferson, supra, 28 Cal.4th at p. 310.)
To summarize, we hold that the standard language of the preprinted form
used in settling workers’ compensation claims releases only those claims that are
within the scope of the workers’ compensation system, and does not apply to
claims asserted in separate civil actions.1 We turn now to the question of whether
1
The compromise and release here, in addition to the preprinted release
language in paragraph 3 quoted on page 2, ante, contains a paragraph 10 that says:
“The nature, duration, extent and cause of the employee’s disability are in dispute.
Applicant desires to control his/her future medical expenses. Defendants desire to
buy their peace. The parties desire to settle the hazards, risks, and delays of
litigation for a lump sum certain. All parties agree that the Compromise and
Release is a fair and equitable settlement. The parties require that the
consideration for this Compromise and Release includes full compensation for all
injuries sustained by the applicant while employed by defendants, including all
specific injuries and continuous trauma. The medical record is herein incorporated
by reference. The parties waive Labor Code § 5313 [the statute requiring the
workers’ compensation judge to make factual findings and a decision determining
the rights of the parties].” The form’s references to disability, medical expenses,
injuries sustained during employment, and a waiver of findings and decisions to be
made by a workers’ compensation judge, suggest that the release does not apply to
claims outside the workers’ compensation system. (See Sumner, supra, 33 Cal.3d
at p. 973, fn. 9.)
It would be helpful to all concerned, of course, if this suggestion could be
made more explicit. We urge those responsible for drafting the standard worker’s
compensation compromise and release form to revise that form to include a
(footnote continued on next page)
9
extrinsic evidence is admissible to show that the parties intended the release to
also apply to claims outside the workers’ compensation system.
III
As discussed below, case law has allowed the use of evidence extrinsic to
the language of the preprinted workers’ compensation compromise and release
form to show whether the parties intended to also release claims outside the
workers’ compensation system.
In a 1983 decision, Sumner, supra, 33 Cal.3d at page 973, this court stated
that a claim for death benefits, which fell within the workers’ compensation
system, might be barred by the executed workers’ compensation release form if
the employer could show that the parties did intend the release to include, as part
of their settlement, a claim for death benefits. Thereafter, however, the Courts of
Appeal extended the use of extrinsic evidence to show whether the parties
intended the release to include claims outside the workers’ compensation system.
(Delaney, supra, 14 Cal.App.4th at pp. 599-600; Asare, supra, 1 Cal.App.4th at
p. 863; Lopez, supra, 229 Cal.App.3d at p. 39.)
We are now convinced that extrinsic evidence should not be admissible to
show that the standard preprinted workers’ compensation release form also applies
to claims outside the workers’ compensation system. To allow such evidence
would unduly burden our courts. Illustrative of this point are the Court of Appeal
decisions discussed earlier: Lopez, supra, 229 Cal.App.3d 31; Asare, supra, 1
Cal.App.4th 856; Delaney, supra, 14 Cal.App.4th 590; and Mitchell, supra, 118
(footnote continued from previous page)
statement, in the clearest possible terms, that execution of the form has no effect
on claims outside the workers’ compensation system.
10
Cal.App.4th 1331. In those cases, as here, the employer relied on standard
language in the preprinted workers’ compensation release form as an affirmative
defense in the worker’s civil lawsuit and later as the basis for a motion for
summary judgment in that action. In each case, the appellate court determined
that there were triable issues of fact as to whether the parties intended the workers’
compensation settlement to also apply to claims outside the workers’
compensation system, thus requiring further proceedings. This necessitated the
presentation of evidence on that issue, and ultimately required resolution of
disputed issues of fact as to what occurred in negotiations at the workers’
compensation proceedings. Thus, allowing such extrinsic evidence would require
our trial courts, which currently are under severe budgetary restraints, to expend
their already scarce resources to divine and reconcile the parties’ intentions in
signing a standard preprinted workers’ compensation release form. And parties
too would have to spend time and money in presenting this evidence.
Moreover, allowing such extrinsic evidence would create a trap for the
unwary worker. It is highly unlikely that an injured employee’s settlement of a
workers’ compensation claim, by signing the mandatory standard preprinted
workers’ compensation release form, would alert the worker that the release also
applies to claims outside the workers’ compensation system. To hold that the
standard language of the release would also apply to the injured worker’s civil
claims outside of the workers’ compensation scheme, regardless of whether a civil
action has been filed at the time of the execution of the workers’ compensation
release, would run counter to the public policy of protecting the injured worker
against the unintentional loss of workers’ rights. (Jefferson, supra, 28 Cal.4th at p.
304; Sumner, supra, 33 Cal.3d at p. 972; Johnson v. Workmen’s Comp. App. Bd.
(1970) 2 Cal.3d 964, 974.)
11
To disallow such extrinsic evidence would not be unfair to the parties. It
would be a simple matter for parties who have agreed to settle not only workers’
compensation claims but also claims outside the workers’ compensation system to
execute another document expressing that agreement. Thus, execution of the
mandatory standard preprinted compromise and release form would only establish
settlement of the workers’ compensation claims; the intended settlement of claims
outside the workers’ compensation system would have to be reflected in a separate
document. (See Jefferson, supra, 28 Cal.4th 299 [attachment to workers’
compensation form documented release of claims outside of workers’
compensation; Delaney, supra, 14 Cal.App.4th at p. 600 [parties should augment
workers’ compensation form to expressly refer to release of claims outside of
workers’ compensation].) As is true with settlements in civil actions generally, the
separate document need not identify precise claims; it would be sufficient to refer
generally to causes of action outside the workers’ compensation law “in clear and
non-technical language.” (Sumner, supra, 33 Cal.3d at p. 972.)
Our holding changes existing law on the admissibility of evidence extrinsic
to the workers’ compensation release to try to show that the release included
causes of action outside the workers’ compensation system. (Lopez, supra, at
p. 39; Asare, supra, 1 Cal.App.4th at pp. 863-864; see Sumner, supra, 33 Cal.3d at
p. 973.) We therefore must determine whether our holding should be applied
retroactively or only prospectively. We now consider that question.
IV
“Although as a general rule judicial decisions are to be given retroactive
effect [citation], there is a recognized exception when a judicial decision changes a
settled rule on which the parties below have relied. [Citations.] ‘[C]onsiderations
of fairness and public policy’ may require that a decision be given only
prospective application. [Citations.] Particular considerations relevant to the
12
retroactivity determination include the reasonableness of the parties’ reliance on
the former rule, the nature of the change as substantive or procedural,
retroactivity’s effect on the administration of justice, and the purposes to be served
by the new rule. [Citations.]” (Smith v. Rae-Venter Law Group (2002) 29 Cal.4th
345, 372; accord, Woods v. Young (1991) 53 Cal.3d 315, 330.)
We conclude that our holding should apply only prospectively. The rule
we are changing is one that parties in this and other cases may have relied on in
settling claims. In particular, employers may have refrained from proposing and
executing separate documents expressly releasing claims outside the workers’
compensation system because they were confident they could prove by extrinsic
evidence a mutual intent to release such claims. Our holding barring the
admission of extrinsic evidence for this purpose has a substantive effect because it
may, in individual cases, effectively alter the legal consequences of executing the
standard compromise and release form. Although barring the use of extrinsic
evidence will preserve judicial resources, denying retroactive application will not
unduly impact the administration of justice because it will merely permit a gradual
and orderly transition.2 Accordingly, we conclude that considerations of fairness
and public policy require prospective application, and that for any preprinted
workers’ compensation settlement form executed before the finality of this
decision (see Sumner, supra, 33 Cal.3d at p. 974), extrinsic evidence may be
2
In cases involving the execution of the preprinted workers’ compensation
release form after the finality of this decision, the Court of Appeal decisions in
Mitchell, supra, 118 Cal.App.4th 1331, Delaney, supra, 14 Cal.App.4th 590,
Asare, supra, 1 Cal.App.4th 856, and Lopez, supra, 229 Cal.App.3d 31, are not to
be followed to the extent that they allow the admission of extrinsic evidence to try
to show that the release extends to claims outside the workers’ compensation
system.
13
admitted to prove the parties intended to release claims outside the workers’
compensation system.3
3
We reject defendants’ argument that plaintiff, by filing her workers’
compensation claim for sexual harassment, necessarily took the position that her
claim was within the workers’ compensation scheme, and thus she is estopped
from asserting in her civil lawsuit that the sexual harassment is outside of that
scheme. The doctrine of judicial estoppel precludes a party from taking
inconsistent positions in judicial or quasi-judicial proceedings. (Jackson v. County
of Los Angeles (1997) 60 Cal.App.4th 171, 183.) Here, however, plaintiff has
taken the same position – that she was sexually harassed in the course of
employment – in two different forums, the workers’ compensation proceeding and
the civil action against defendants. Therefore, estoppel does not apply here.
Our holding that this decision applies prospectively only means that there
may be further proceedings in this case addressed to the issue of the intent of the
parties in entering into the workers’ compensation compromise and release. In the
event that such proceedings in this case do occur, we note that the interpretation of
(footnote continued on next page)
14
The judgment of the Court of Appeal is affirmed.
KENNARD, J.
WE CONCUR:
GEORGE, C. J.
BAXTER, J.
WERDEGAR, J.
CHIN, J.
MORENO, J.
(footnote continued from previous page)
the compromise and release requires consideration of “ ‘all credible evidence
offered to prove the intention of the parties.’ ” (Mitchell, supra, 118 Cal.App.4th
at p. 1342, fn. 3; accord, Asare, supra, 1 Cal.App.4th at pp. 862-863.) Kohler v.
Interstate Brands Corp. (2002) 103 Cal.App.4th 1096, is disapproved to the extent
it is inconsistent with this view.
15
CONCURRING AND DISSENTING OPINION BY BROWN, J.
I agree with the majority’s decision to affirm the judgment of the Court of
Appeal. But that is the only portion of the majority opinion with which I am in
accord. In reaching the correct result, the majority—unable to resist the
bureaucratic propensity for intermeddling—improperly and unnecessarily creates
an exception to our long-standing rules of contract interpretation for a preprinted
compromise and release form used in workers’ compensation cases. Because I
believe that generally applicable rules should govern here, I write separately.
I.
Under Civil Code section 1635, “[a]ll contracts, whether public or private,
are to be interpreted by the same rules, except as otherwise provided by this
Code.” Our courts have consistently applied this maxim to releases and
determined the scope of a release using our long-standing rules of contract
interpretation. (See, e.g., Hess v. Ford Motor Co. (2002) 27 Cal.4th 516, 524
(Hess); Solis v. Kirkwood Resort Co. (2001) 94 Cal.App.4th 354, 360 (Solis).)
Indeed, we purportedly applied these rules to preprinted release forms used in
workers’ compensation cases just two years ago in Jefferson v. Department of
Youth Authority (2002) 28 Cal.4th 299, 304-307 (Jefferson).
These rules provide that a “contract must be so interpreted as to give effect
to the mutual intention of the parties as it existed at the time of contracting, so far
as the same is ascertainable and lawful.” (Civ. Code, § 1636.) “When a contract
1
is reduced to writing, the intention of the parties is to be ascertained from the
writing alone, if possible . . . .” (Civ. Code, § 1639.) But “[w]hen, through fraud,
mistake, or accident, a written contract fails to express the real intention of the
parties, such intention is to be regarded, and the erroneous parts of the writing
disregarded.” (Civ. Code, § 1640.)
“The words of a contract are to be understood in their ordinary and popular
sense, rather than according to their strict legal meaning; unless used by the parties
in a technical sense, or unless a special meaning is given to them by usage, in
which case the latter must be followed.” (Civ. Code, § 1644.) “If the terms of a
promise are in any respect ambiguous or uncertain, it must be interpreted in the
sense in which the promisor believed, at the time of making it, that the promisee
understood it.” (Civ. Code, § 1649.) Moreover, a “contract may be explained by
reference to the circumstances under which it was made, and the matter to which it
relates.” (Civ. Code, § 1647.) Thus, “[a]n ambiguity can be patent, arising from
the face of the writing, or latent, based on extrinsic evidence.” (Solis, supra, 94
Cal.App.4th at p. 360.) And, if an ambiguity exists, extrinsic evidence may be
admitted in “interpreting the contract.” (Winet v. Price (1992) 4 Cal.App.4th
1159, 1165 (Winet).)
Although these rules govern all contracts absent a statutory provision to the
contrary (Civ. Code, § 1635), the majority refuses to apply them. First, the
majority ignores the language of the release (see Civ. Code, §§ 1639, 1644) and
holds that “the standard language of the preprinted form used in settling workers’
compensation claims releases only those claims that are within the scope of the
workers’ compensation system, and does not apply to claims asserted in separate
civil actions.” (Maj. opn., ante, at p. 9.) Second, it bars consideration of extrinsic
evidence “to show that the standard preprinted workers’ compensation release
2
form also applies to claims outside the workers’ compensation system.” (Id. at
p. 10.)
The majority, however, identifies no Civil Code or workers’ compensation
statute that creates an exception to our long-standing rules of contract
interpretation for preprinted release forms used in workers’ compensation cases.
Indeed, it provides no statutory basis for its holding, and my review of California
law reveals no statutory support for this exception. As such, I see no legitimate
ground for creating it. (See Civ. Code, § 1635.)
The majority’s stated grounds for creating such an exception are not
compelling. As the majority correctly states, execution of the preprinted release
form does not release a claim for vocational rehabilitation services unless specific
findings are made. (See maj. opn., ante, at p. 5.) But this exception to our rules of
contract interpretation has a clear statutory basis—Labor Code section 4646,
subdivision (a). By contrast, there is no statutory basis for the majority’s holding
that the preprinted release form, as a matter of law, does not release a claim
outside the workers’ compensation scheme.
Likewise, the Court of Appeal cases cited by the majority—Lopez v.
Sikkema (1991) 229 Cal.App.3d 31 (Lopez), Asare v. Hartford Fire Ins. Co.
(1991) 1 Cal.App.4th 856 (Asare), Delaney v. Superior Fast Freight (1993) 14
Cal.App.4th 590 (Delaney), and Mitchell v. Union Central Life Ins. Co. (2004)
118 Cal.App.4th 1331 (Mitchell)—are not persuasive. To the extent these cases
exempt preprinted release forms used in workers’ compensation cases from our
rules of contract interpretation, they provide no statutory basis for doing so.
Absent such a basis, these cases do not and cannot support the majority’s holding.
(See Civ. Code, § 1635.)
Moreover, these cases misread our decision in Sumner v. Workers’ Comp.
Appeals Bd. (1983) 33 Cal.3d 965 (Sumner). In Sumner, an employee executed a
3
preprinted release form containing virtually the same language at issue here. (Id.
at pp. 967-969.) Based on this language, the employer contended the employee
released his claim for death benefits—a claim that he did not know of at the time
he signed the release. (Id. at p. 969.) Because the employee was unsophisticated
and executed the release without the benefit of counsel (id. at p. 972), we
concluded that the release did not cover the plaintiff’s unknown claim for death
benefits. (Id. at pp. 972-973.) We reached this conclusion even though the release
included an addendum waiving all unknown claims and eschewing the benefits of
Civil Code section 1542. (Sumner, at pp. 972-973.)
In reaching this conclusion, however, we did not create an exception to our
long-standing rules of contract interpretation. Specifically, Sumner did not, as
suggested by Lopez, Asare, Delaney and Mitchell, place the burden on employers
to enumerate the causes of action covered by the preprinted release form even
though the form expressly covered all “claims and causes of action.” (See Lopez,
supra, 229 Cal.App.3d at pp. 38-39; Asare, supra, 1 Cal.App.4th at p. 864;
Delaney, supra, 14 Cal.App.4th at pp. 599-600; Mitchell, supra, 118 Cal.App.4th
at pp. 1341-1342.) Instead, Sumner simply applied our rules of contract
interpretation and the case law construing these rules. These rules provide that
“[a] general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if known by
him must have materially affected his settlement with the debtor.” (Civ. Code,
§ 1542, italics added.) Although a releasor may waive all unknown claims despite
the protections of Civil Code section 1542, an “oblique reference to ‘all known
and unknown’ claims” is not enough. (Winet, supra, 4 Cal.App.4th at p. 1170.)
Moreover, any waiver of the benefits of Civil Code section 1542 is invalid if the
releasor is unsophisticated and lacks the advice of independent counsel. (See
Winet, at p. 1170.) Because the plaintiff in Sumner was unsophisticated and
4
lacked independent counsel, we applied these rules to hold that the preprinted
release form and addendum did not bar the plaintiff’s unknown claim for death
benefits.1 (See Casey v. Proctor (1963) 59 Cal.2d 97, 109.) Thus, Sumner
followed our rules of contract interpretation and did not create an exception to
these rules for preprinted release forms used in workers’ compensation
settlements.
In any event, as the majority observes, our Courts of Appeal have
uniformly “extended the use of extrinsic evidence to show whether the parties
intended the release to include claims outside the workers’ compensation system.”
(Maj. opn., ante, at p. 10.) As such, the cited cases do not support the majority’s
decision to prohibit the consideration of extrinsic evidence, in direct contravention
of our rules of contract interpretation. (See, e.g., Civ. Code, § 1647; Hess, supra,
27 Cal.4th at p. 527.)
Finally, the special nature of the workers’ compensation system does not
dictate a contrary result. As the majority correctly notes, we must construe the
preprinted release form in light of “the public policy of protecting the injured
worker against the unintentional loss of workers’ rights.” (Maj. opn., ante, at p.
11.) But the majority conveniently forgets that “[w]e have been particularly
rigorous about strictly enforcing broad release language in workers’ compensation
settlements, because, in that context, [Workers’ Compensation Appeals Board
(WCAB)] oversight helps to ensure fairness.” (Jefferson, supra, 28 Cal.4th at pp.
303-304.) Indeed, workers and their attorneys—and not employers—are in the
best position to know what claims they plan to pursue as a result of a work-related
1
Sumner does not control here because plaintiff knew about the statutory
cause of action at issue here and had the benefit of independent counsel at the time
she signed the release.
5
injury. I therefore see no statutory or policy grounds for giving workers settling a
workers’ compensation claim greater protection than litigants settling any other
claim. Accordingly, our long-standing rules of contract interpretation should
govern our interpretation of preprinted release forms used in workers’
compensation cases.
II.
As described above, our rules of contract interpretation provide, in relevant
part, that a “release of ‘ “[a]ll claims” ’ [citations] covers claims that are not
expressly enumerated in the release” absent “fraud, deception or similar abuse.”
(Jefferson, supra, 38 Cal.4th at p. 305.) Extrinsic evidence may, however,
establish “that the release refers only to all claims of a particular type, and
consideration of extrinsic evidence would be appropriate where . . . the parties
know of a particular claim but do not refer to it expressly in their release.
[Citation.]” (Ibid.) If no extrinsic evidence of a narrower construction exists,
however, the release of “all claims and causes of action” must be given
comprehensive scope. Otherwise, “it [would be] virtually impossible to create a
general release that . . . actually achieve[d] its literal purpose.” (Winet, supra, 4
Cal.App.4th at pp. 1172-1173.)
In this case, plaintiff Carolyn Claxton did not claim fraud, deception, or
similar abuse. Thus, under our rules of contract interpretation, the ordinary and
popular meaning of the language of the preprinted release form governs absent an
ambiguity. (See Civ. Code, §§ 1639, 1644, 1649.) This language, by its terms,
bars claims that are not expressly enumerated in the release—including claims that
fall outside the workers’ compensation system. Indeed, by expressly barring both
“claims and causes of action,” the release necessarily encompasses more than just
“claims” within the scope of the workers’ compensation system. Otherwise, the
release could have just barred “claims”—and not “causes of action.”
6
Nonetheless, the extrinsic evidence establishes an ambiguity as to the scope
of the release in this particular context. At the time plaintiff signed the release,
both plaintiff and defendants knew of plaintiff’s claim of sexual harassment in
violation of the Fair Employment and Housing Act (FEHA) (Gov. Code, § 12900
et seq.). Thus, the failure of the release to mention the FEHA claim creates a
latent ambiguity (see Solis, supra, 94 Cal.App.4th at p. 360), and leaves
unresolved the issue of whether the parties intended to release plaintiff’s FEHA
claim (see Hess, supra, 27 Cal.4th at p. 527 [holding that the failure of a release to
mention an outstanding claim known to the parties establishes an ambiguity as to
the scope of that release]). Absent extrinsic evidence establishing that the parties
did not intend for the release to cover the FEHA claim, however, the ordinary and
popular meaning of the language of the release controls and bars the claim. (See
Civ. Code, §§ 1639, 1644.) Thus, to avoid summary judgment, plaintiff had to
introduce extrinsic evidence demonstrating that the parties did not intend for the
release to cover the FEHA claim. (See Hess, supra, 27 Cal.4th at p. 527; see also
Civ. Code, § 1647.)
And plaintiff did so. First, the release describes plaintiff’s injuries as
“Psyche, left Lower Extremity.” In doing so, the release apparently refers only to
plaintiff’s workers’ compensation claim predicated on her knee injury and the
injury to her psyche caused by that injury, and implicitly excludes the injury to her
psyche caused by the alleged sexual harassment. Second, the release contains a
waiver of prospective rehabilitation services with the requisite finding by the
workers’ compensation judge. (See Lab. Code, § 4646.) The presence of this
waiver suggests that the parties contemplated the possibility of additional damages
not covered by the workers’ compensation scheme and specifically chose to
exclude plaintiff’s FEHA claim from the scope of the release. Third, the release
only covers claims against defendant Pacific Maritime Association, plaintiff’s
7
employer, and does not include claims against the alleged harasser Ray Waters—a
named defendant in the FEHA action. The release’s failure to mention one of the
named defendants in the FEHA action suggests that the parties did not intend for
the release to cover the FEHA claim. Finally, the WCAB order approving the
settlement states that it was only “settling this case.” By expressly limiting the
settlement to “this case,” the order suggests that the release covered only
plaintiff’s workers’ compensation cases and no other cases in existence at that
time—such as plaintiff’s FEHA action already filed in state court. Viewed in its
totality, this evidence establishes a triable issue as to whether the parties intended
for the release to encompass plaintiff’s FEHA cause of action. Accordingly, I join
the majority in affirming the judgment of the Court of Appeal, reversing summary
judgment in favor of defendants.
BROWN, J.
8
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. Name of Opinion Claxton v. Waters
__________________________________________________________________________________
Unpublished Opinion
NP opn. filed 3/12/02 - 2d Dist., Div. 8Original Appeal
Original Proceeding
Review Granted
Rehearing Granted
__________________________________________________________________________________
Opinion No.
S106106Date Filed: August 30, 2004
__________________________________________________________________________________
Court:
SuperiorCounty: Los Angeles
Judge: Richard F. Charvat
__________________________________________________________________________________
Attorneys for Appellant:
Law Offices of Joseph R. Zamora and Joseph R. Zamora for Plaintiff and Appellant.__________________________________________________________________________________
Attorneys for Respondent:
Gibson, Dunn & Crutcher, David A. Cathcart, Paul DeCamp, Michele L. Maryottt and Jeffrey F. Webb forDefendants and Respondents.
1
Counsel who argued in Supreme Court (not intended for publication with opinion):
Joseph R. ZamoraLaw Offices of Joseph R. Zamora
2118 Wilshire Blvd., Suite 845
Santa Monica, CA 90403
(310) 829-2100
Jeffrey F. Webb
Gibson, Dunn & Crutcher
333 S. Grand Ave.
Los Angeles, CA 90071-3197
(213) 229-7279
2
Date: | Docket Number: |
Mon, 08/30/2004 | S106106 |
1 | Waters, Ray (Defendant and Respondent) Represented by Michele Leigh Maryott Gibson Dunn & Crutcher LLP 4 Park Plaza Irvine, CA |
2 | Pacific Maritime Association (Defendant and Respondent) Represented by Michele Leigh Maryott Gibson Dunn & Crutcher LLP 4 Park Plaza Irvine, CA |
3 | Pacific Maritime Association (Defendant and Respondent) Represented by Jeffrey F. Webb Gibson Dunn & Crutcher LLP 333 S Grand Ave Los Angeles, CA |
4 | Claxton, Carolyn (Plaintiff and Appellant) Represented by Joseph R. Zamora Law Offices Of Joseph R. Zamora 2118 Wilshire Blvd, Suite 845 Santa Monica, CA |
Disposition | |
Aug 30 2004 | Opinion: Affirmed |
Dockets | |
Apr 19 2002 | Petition for review filed respondents Ray Waters & Pacific Maritime Association |
Apr 24 2002 | Received Court of Appeal record 1 doghouse |
May 10 2002 | Answer to petition for review filed By counsel for appellant {Carolyn Claxton} / 40(K). |
Jun 12 2002 | Petition for Review Granted (civil case) Votes: George, CJ., Kennard, Baxter, Werdegar, Chin, Brown and Moreno, JJ. |
Jun 17 2002 | Record requested requested remainder of record. |
Jun 21 2002 | Received Court of Appeal record 1 doghouse |
Jun 27 2002 | Certification of interested entities or persons filed by counsel for respondents Ray Waters et al. |
Jul 1 2002 | Certification of interested entities or persons filed by counsel for appellant Carolyn Claxton. |
Jul 12 2002 | Opening brief on the merits filed counsel for resps Ray Waters & Pacific Maritime Assoc. |
Aug 13 2002 | Answer brief on the merits filed by counsel for appellant Carolyn Claxton. (timely filed per rule 40k) |
Sep 3 2002 | Reply brief filed (case fully briefed) by respondents Ray Waters and Pacific Maritime Association |
Apr 28 2004 | Case ordered on calendar 6-2-04, L. A. @ 1:30 p.m. |
Jun 2 2004 | Cause argued and submitted |
Aug 30 2004 | Opinion filed: Judgment affirmed in full Majority Opinion by Kennard, J. joined by George, CJ., Baxter, Werdegar, Chin, Moreno, JJ. C&D Opinion by Brown, J. |
Sep 15 2004 | Opinion modified - no change in judgment |
Sep 30 2004 | Remittitur issued (civil case) |
Briefs | |
Jul 12 2002 | Opening brief on the merits filed |
Aug 13 2002 | Answer brief on the merits filed |
Sep 3 2002 | Reply brief filed (case fully briefed) |