O'Neal v. Kennamer

958 F.2d 1044, 1992 WL 64864

• Court: Court of Appeals for the Eleventh Circuit
• Decided: April 20, 1992
• Docket: No. 91-7550
• Status: Published

Opinions

GODBOLD, Senior Circuit Judge:

This appeal concerns a conflict of laws question with respect to subrogation rights of the intervenors, Liberty Mutual and Clo-pay. It also raises the propriety of the district court’s denial of a Rule 59(e) motion to alter or amend the judgment, which motion raised for the first time the contention that state law principles under which the matter was litigated and decided had been preempted by federal law.

Kevin O’Neal, a resident of Tennessee who worked for Clopay, a Tennessee employer, was injured in a truck collision in Alabama. He received disability and medical benefits through his employer as required by Tennessee worker compensation laws. O’Neal sued Prince Trucking and W.S. Newell for his injuries in an Alabama federal court with diversity jurisdiction. Clopay and Liberty Mutual, Clopay’s workers’ compensation program administrator,¹ intervened in this suit.

O’Neal settled his suit in April 1991. After settlement the court set about to determine the intervenors’ rights to subrogation. Liberty Mutual and Clopay filed a motion setting out the amounts O’Neal had received as compensation and as medical benefits and moved the court to award to them subrogation rights according to provisions of the Tennessee workers’ compensation law. Under that law they would be subro-gated for both compensation payments and medical benefits. They alleged that O’Neal was a resident of Tennessee, that his place of employment was Tennessee, that his contract of employment was entered into in Tennessee and that the terms of the Tennessee workers’ compensation Act were part of his contract, and that the Act covered injuries arising outside of Tennessee as well as those arising within Tennessee. The movants supported their joint motion with affidavits, citations, and a 62 page copy of the entire chapter of the Tennessee Code on workers’ compensation.

Defendant Newell responded with a motion for partial summary judgment and a supporting brief asserting that under Alabama law the lex loci delicti would control, and, applying Alabama law, Liberty Mutual and Clopay were entitled to recover compensation payments but not medical benefits paid. Prince followed with a similar motion for partial summary judgment, attaching some 41 pages of answers to interrogatories, medical reports, correspondence, and other data.

Liberty Mutual and Clopay then filed a motion in opposition to Newell’s partial summary judgment motion, supported by a ten page brief contending that Tennessee law covered, not Alabama law. Still later they filed an amendment to this motion, placing before the court a copy of Clopay’s Employee Benefit Plan, some 122 pages in length.

The district court held that Alabama law was controlling, with the result that Liberty Mutual and Clopay were subrogated to the amount of compensation paid but not to medical benefits. Judgment was entered on May 9.

I. The judgment

A federal court in a diversity case is required to apply the laws, including principles of conflict of laws, of the state in which the federal court sits. Goodwin v. George Fischer Foundry Systems, Inc., 769 F.2d 708 (11th Cir.1985). The first step in determining whose law is to govern in a conflict situation is the characterization of what kind of case is involved. The law of the forum controls this. Alabama has defined cases like this as tort cases. This is not a suit for workers’ compensation. An action against a third-party tortfeasor (or against a co-employee, where not forbidden by the workers’ compensation act) is a tort action for damages. Johnson v. Asphalt Hot Mix, 565 So.2d 219 (Ala.1990); Metropolitan Casualty Ins. Co. v. Sloss-Sheffield Steel & Iron Co., 241 Ala. 545, 3 So.2d 306 (1941). The right to which a subrogee is subrogated is “the right of action arising in favor of the injured workmen ... as a proximate consequence of the negligence or wrongful act of [a] third person.” Id. 3 So.2d at 308.²

We turn then to Alabama’s conflict of laws rules that govern choice of law in tort cases. The district court held that the substantive rights of an injured party in a tort case are determined according to the law of the state in which the accident occurred. Fitts v. Minnesota Mining & Mfg. Co., 581 So.2d 819, 820 (Ala.1991). If an injured employee recovers damages from a third party, the employer can seek reimbursement for compensation paid to the employee pursuant to workers compensation laws. Ala.Code § 25-5-11(a). In Alabama “compensation” does not include medical benefits. Liberty Mutual Ins. Co. v. Manasco, 271 Ala. 124, 123 So.2d 527, 530 (1960).

In Northeast Utilities, Inc. v. Pittman Trucking Co., 595 So.2d 1351 (Ala.1992) the Alabama Supreme Court addressed the issue before us — in a third party action brought in Alabama by a plaintiff who is workers’ compensation insured in another state, are the rights to proceeds received by the plaintiff determined by the workers’ compensation law of Alabama, the lex loci, of the state whose law the plaintiff invoked to obtain workers’ compensation benefits? The court held that Alabama law applied to the rights to the proceeds.

Appellants seek to avoid the above analysis at the first step by characterizing the dispute between the intervenors and O’Neal not as a tort case but as a contract case arising from an agreement implied by law between employer and employee. As they spell it out, claims for workmen’s compensation are based upon an implied agreement between employee and employer, and that agreement is in the nature of a quid pro quo for which the employee gives up a potentially higher recovery based on tort and receives a high degree of certainty in the receipt of benefits, and the employer gives up tort-based defenses in exchange for benefits that are certain but limited. This, intervenors say, is an implied provision of O’Neal’s Tennessee agreement. The difficulty with this is that the decision of what kind of case is involved is governed by Alabama law, and Alabama characterizes this as a tort case, which under Alabama conflicts of laws rules requires application of the lex loci, and, as Northeast Utilities holds, these same principles apply to a determination of the right to proceeds of a third party suit brought in Alabama by the employee. The district court did not err in following Alabama law and denying subro-gation to medical benefits and in declining to follow Tennessee law.

II. The motion to amend or vacate the judgment

Liberty Mutual and Clopay, having litigated and lost on the theory that Tennessee law applied, timely filed a Rule 59(e) motion to alter, amend or vacate the judgment and to award them subrogation to all benefits. They asserted for the first time that neither Tennessee nor Alabama law applied because the employee benefits provided by Clopay to O’Neal constituted an “employee welfare benefit plan” under 29 U.S.C. § 1001, et seq., the Employee Retirement Income Security Act. This Act, they said, supersedes all state laws that relate to an employee welfare benefit plan, including state statutes, regulations, rules and court decisions, and any other state action having the effect of law. Consequently, they contended that the provisions of the Clopay plan itself controlled and that it provided for a right to subrogation, for all benefits paid. On June 11, 1991 the court denied the Rule 59(e) motion.

The district court did not commit error in denying the Rule 59(e) motion. The decision to alter or amend a judgment is committed to the sound discretion of the district court. This court will not overturn a denial of a Rule 59 motion absent abuse of discretion. American Home Assur. Co. v. Glenn Estess & Associates, Inc., 763 F.2d 1237, 1238-39 (11th Cir.1985). Motions to amend should not be used to raise arguments which could, and should, have been made before the judgment was issued. Lussier v. Dugger, 904 F.2d 661, 667 (11th Cir.1990). Denial of a motion to amend is “especially soundly exercised when the party has failed to articulate any reason for the failure to raise the issue at an earlier stage in the litigation.” Id.

We have described above the efforts made by intervenors to establish their right to recoup medical benefits they had paid by asserting the primacy of the Tennessee law to the exclusion of Alabama law. Nowhere, until after judgment, did inter-venors even whisper that ERISA might govern this case. For several reasons the district court did not abuse its discretion in denying intervenors’ effort to obtain a second bite at the apple. The intervenors did not then, and do not now, explain why they failed to raise before judgment the preemption argument they now assert.³ Nor do they explain why the district court’s denial of their motion was an abuse of discretion.

Moreover, there are many bridges to be crossed, factual and legal, before a determination can be reached of whether federal law does or does not preempt. No answer is at hand from intervenors’ motion (which did not seek a new trial, although it did seek a hearing on the issue of ERISA preemption). There is a factual dispute whether the benefits paid to O’Neal were paid “by virtue of the employee benefit plan” or pursuant to a separate insurance contract with Liberty Mutual maintained solely to comply with Tennessee workers’ compensation law. See n. 1 supra. Resolution of this question would require examination of the employee benefit plan handbook and the insurance contract between Liberty Mutual and Clopay. Another issue necessary to determine would be whether state law (Alabama and Tennessee) relating to workers compensation “regulates the business of insurance,” which would cause that law to be exempt from preemption under 29 U.S.C. § 1144(b)(2)(A). Answering this inquiry would require examination of factual inquiries set out in Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 743, 105 S.Ct. 2380, 2391, 85 L.Ed.2d 728 (1985),⁴ as well as determination of whether the stop-loss/catastrophic coverage provision of the plan caused Clopay to be self-insured, since § 1144(b)(2)(B) prevents application of laws on subrogation to self-funded insurance plans even though such laws govern insurance. FMC Corp. v. Holliday, — U.S. -, -, 111 S.Ct. 403, 112 L.Ed.2d 356, 366 (1990); see also, n. 1, supra.

Additionally, it is not clear that if inter-venors surmounted the above barriers they then would be entitled to subrogation of medical benefits. Their contention is that the provisions of the plan itself give them that entitlement. The subrogation provision of the plan provides;

The plan shall be subrogated to all claims, demands, actions and rights of your recovery against a third party or parties and such third party or parties’ insurers to the extent of any and all payments made hereunder by the plan in all jurisdictions where subrogation is lawfully permitted.

Intervenors construe this to mean that there is subrogation for all benefits paid even in a jurisdiction (such as Alabama) whose subrogation law permits only recovery of less than all. But a court may well construe the language to mean that payments may be recovered to only the extent recovery is lawfully permitted by the sub-rogation laws of the state, i.e., in this case Alabama. This is the exact result the district court reached in this case though for different reasons.

The district court did not abuse its discretion.

The motion to supplement the record is DENIED. The judgment is AFFIRMED. The order denying intervenors’ Rule 59(e) motion is AFFIRMED.

1 . The relationship between Clopay and Liberty Mutual is disputed. O'Neal asserts that Liberty Mutual insures Clopay’s workers' compensation program; Clopay contends that it is self-insured and Liberty Mutual only administers its program. For the purposes of this opinion we need not resolve this dispute.

2 . A federal district court in Georgia, applying Georgia law, reasoned that the subrogation issue sounded in tort because subrogation involved "stepping into the shoes” of the plaintiff. If those shoes were standing in a tort case, the rights of the subrogee should be determined according to tort law. Swain v. D & R Transport Co., 735 F.Supp. 425 (M.D.Ga.1990).

3 . The scramble engaged in by intervenors to present a new theory post-judgment did not end with the district court’s denial of their Rule 59(e) motion. Almost four months after the denial they filed a motion to supplement the record on appeal by including in the record a memorandum of law that the district court had refused to consider because it was untimely filed. The district court denied the motion to supplement, noting that “because of its grossly untimely filing the Court declined to consider it.”

The intervenors then moved this court to permit the record on appeal to be supplemented with the untimely memorandum. That motion was carried with the case, and it is denied.

4 . (1) Whether the practice has the effect of transferring or spreading policyholders’ risks; (2) whether the practice is an integral part of the policy relationship between the insurer and the insured; and (3) whether the practice is limited to entities within the insurance company. Metropolitan Life 471 U.S. at 743, 105 S.Ct. at 2391.