Del Rio v. Northern Blower Co.

574 F.2d 23
CourtCourt of Appeals for the First Circuit
DecidedApril 11, 1978
DocketNos. 77-1379, 77-1522
StatusPublished
Cited by25 cases

This text of 574 F.2d 23 (Del Rio v. Northern Blower Co.) is published on Counsel Stack Legal Research, covering Court of Appeals for the First Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Del Rio v. Northern Blower Co., 574 F.2d 23 (1st Cir. 1978).

Opinion

ALDRICH, Senior Circuit Judge.

In July, 1970 Jose Del Rio, in the course of his employment by Fibre Processing Corporation in Manchester, New Hampshire, suffered personal injury while operating a waste picker manufactured by a third party. He made claim against Liberty Mutual Insurance Company, Fibre’s workmen’s compensation carrier, and ultimately made a lump sum settlement totaling $24,695. Under New Hampshire law, Liberty was entitled to sue the third party in Del Rio’s name, or Del Rio was entitled to bring suit himself, and recover if the machinery were defective or negligently manufactured, and a cause of his injury. Whoever were to bring the suit, under New Hampshire law the insurer would have a first lien on the recovery equal to the amount paid by it to [25]*25the employee, less its share of the costs of suit, with the employee to receive the balance. New Hampshire RSA 281:14.1 Liberty elected not to sue.

In March, 1975, Del Rio, after duly notifying Liberty, instituted a diversity action against the machine manufacturer in the United States District Court for the District of New Hampshire. Shortly after trial was commenced, the case was settled. On a number of occasions, beginning prior to trial, Del Rio’s counsel endeavored to settle the case, and in connection therewith requested Liberty to waive a portion of its lien, to increase Del Rio’s share of the recovery. Liberty at all times refused. Consequently, when he ultimately settled for $66,000, the gross amount to which Del Rio was entitled was $66,000 less Liberty’s lien of $24,695, or $41,305. The present question then arose — who was to pay, and in what proportion, the counsel fee and expenses, which it was agreed properly amounted to $23,659.

The New Hampshire statute, RSA 281:14 I, n.l, ante, states that the insurance carrier’s lien shall bear its “pro rata share of expenses and costs of action as determined in Paragraph IV hereof.” Paragraph IV provides as follows:

“IV. Whenever there is a recovery against a third person under any of the preceding paragraphs, the labor commissioner or the superior court, as the case may be, shall order such division of expenses and costs of action, including attorneys’ fees, between employer, or the employer’s insurance carrier, and employee as justice may require.”

Taking the position that Liberty had acted wrongfully in refusing to reduce its lien in order to facilitate settlement, Del Rio moved in the district court to charge the entire costs of suit against Liberty’s lien. The court so ordered, with the result that Del Rio received the entire net amount of the settlement, less the $1,037 balance of Liberty’s lien, or $40,268, as against Liberty’s receipt of $1,037. Liberty appeals.

From the standpoint of facilitating settlement, it is obvious that the defendant manufacturer of the waste picker was interested solely in the gross amount it had to pay, and was unconcerned with how the recipients divided it. Hence, to put it baldly, Del Rio was saying to the insurer, you have a duty to make the defendant’s offer larger vis-a-vis myself, so that I’ll be more willing to settle. It might be sound business judgment for an insurer who fears that if the case is not settled it will lose altogether, to choose to contribute by way of a partial waiver of its lien. The question, however, is whether it is obliged to do so, or be penalized by the court.

We use the word “penalized” advisedly. It is manifest that if the insurer had agreed to reduce its lien by whatever amount the court thought fair, it would have recovered the balance, and, correspondingly, would not have been charged by the court with the entire cost of suit. Thus the court, by imposing the entire cost of suit upon Liberty, did two things. It held that the insurer should have agreed to take less, and then, because it did not, gave it even less than [26]*26that. The statute, at most, authorized a “division,” not a penalty.2

The court’s reasoning was set forth in a memorandum opinion. The court found, first, that Liberty had refused to participate in the preparation of the ease for trial, or to advance any expenses thereof. This finding was correct. It ruled that Liberty was under no duty with respect to either of these matters. This ruling was correct, and is not presently attacked. A carrier has the option to bring suit; it is not required to do so, or to assist therein. Secondly, the court found that Liberty did not “participate meaningfully in settlement negotiations.” This finding, also, was right; the question is- the correctness of the ruling that it was obliged to do so.

With respect to this the court said, “ . . . [0]nce an action has been commenced by an individual, a compensation carrier cannot sit back and refuse blindly to reduce its lien at all. Such an attitude is antithetical to the settlement of these types of cases and . . . is an unwarranted obstruction to the orderly processing of cases and the administration of justice. . [T]he refusal of the company to make any reduction of its lien was arbitrary and unrealistic. . . . Justice requires that [it] pay the full amount of the plaintiffs’ attorneys’ fees . . . and . expenses.”

However desirable it may be from the standpoint of the court’s disposing of its calendar that cases be settled rather than tried, it could not be “arbitrary” for the insurer to refuse to reduce its lien unless it had a duty to do so. There is no duty, however, to settle cases, or to reduce one’s claims. Nor does the orderly administration of justice require a party to contribute to someone else’s settlement. Unless his claim is frivolous, a party is entitled to assert it, and to whatever judicial time is required to try it. See La Buy v. Howes Leather Co., 1957, 352 U.S. 249, 258, 77 S.Ct. 309, 1 L.Ed.2d 290. There is no basis for the general duty to settle seemingly articulated by the court. See, e. g., Cropp v. Woleslagel, 1971, 207 Kan. 627, 633, 485 P.2d 1271, 1276, (“[T]he court should never work to coerce or compel a litigant to make a settlement.”); Wolff v. Laverne, Inc., 1962, 17 A.D.2d 213, 233 N.Y.S.2d 555; see also Padovani v. Bruchhausen, 2 Cir., 1961, 293 F.2d 546; 3 J. Moore, Federal Practice, ¶16.17, at 1128 (2d ed. 1974).

On this appeal Del Rio concedes that as a matter of general principle there is no duty to compromise, and relies solely on the statute. The trial court, citing no common law authorities, briefly adverted to the statute, but spoke mainly of the duty of compensation carriers in particular, and the orderly process and administration of justice in general. We find nothing in the statute or in the statutory concept to support the court’s result.

At the expense of reciting the obvious, the scheme of workmen’s compensation is that the employer, either as a self-insurer, or by payment of premiums to a professional carrier, undertakes to compensate any employee injured in the course of his employment, at the financial rate set by the state, regardless of fault. Conversely, the [27]*27employee, in consideration of the employer’s obligation to pay him irrespective of fault, waives the opportunity of claiming a larger amount on the basis of common law negligence.

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Bluebook (online)
574 F.2d 23, Counsel Stack Legal Research, https://law.counselstack.com/opinion/del-rio-v-northern-blower-co-ca1-1978.