Stout v. State Compensation Fund

44 P.3d 178, 202 Ariz. 300, 372 Ariz. Adv. Rep. 14, 2002 Ariz. App. LEXIS 58
CourtCourt of Appeals of Arizona
DecidedApril 25, 2002
DocketNo. 1 CA-CV 01-0079
StatusPublished
Cited by3 cases

This text of 44 P.3d 178 (Stout v. State Compensation Fund) is published on Counsel Stack Legal Research, covering Court of Appeals of Arizona primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Stout v. State Compensation Fund, 44 P.3d 178, 202 Ariz. 300, 372 Ariz. Adv. Rep. 14, 2002 Ariz. App. LEXIS 58 (Ark. Ct. App. 2002).

Opinion

NOYES, Judge.

¶ 1 Todd Stout died from injuries received in an industrial accident in which he, his employer, and a third party shared fault. The third party (“Luna Tech”) agreed to settle for its liability policy limits of $1,000,000. Because the State Compensation Fund had a lien that could one day exceed $1,000,000, the law required that the Stouts obtain the Fund’s written approval of the settlement. After the Stouts asked for more of a lien compromise than the Fund was willing to grant, the Fund refused to approve the settlement. The Stouts then sued the Fund, seeking a judgment declaring that they could settle with the third party without the Fund’s consent. The trial court granted summary judgment to the Fund, the Stouts appealed, and this court affirmed. Stout v. State Compensation Fund (“Stout I”), 197 Ariz. 238, 3 P.3d 1158 (App.2000), review pending.

¶ 2 In May 1998, while the appeal in Stout I was pending, the Stouts and Luna Tech entered into a high/low agreement that provided, in part, “Regardless of the judge’s determination of damages, the parties agree that the maximum amount that Luna Tech shall pay is $1,000,000. Additionally, the parties agree that the minimum amount that the plaintiffs shall receive is $800,000.” Because the parties also agreed that Luna Tech would pay up to $100,000 total to two non-Stout plaintiffs (for property damage), the agreement ensured that Luna Tech would pay the Stouts no less than $800,000 and no more than $900,000.

¶ 3 The Stouts and Luna Tech also executed a “Stipulation re: Trial Procedure,” which provided that each side waived its right to trial by jury and its right to appeal, and that [302]*302each side would have four hours to present its case and one hour for opening statements and final arguments. The stipulation also provided, “Within thirty (30) days of the judge’s determination of fault and damages, Luna Tech agrees to pay its proportionate share of the damages as determined by the judge subject to the high/low agreement of the parties.”

¶4 Trial was in August 1998 before the Honorable B. Michael Dann. The parties waived the presence of a court reporter. After the trial, the court took the matter under advisement and later announced verdicts that apportioned 50% of the fault to Todd Stout, 25% to the employer, and 25% to Luna Tech. The court also awarded $819,323 in damages to Todd Stout’s estate, $3,897,318 to Debbie Stout, $550,000 to Logan Stout, and $350,000 to Pat Stout, for a total award of $5,616,641. The trial court’s minute entry verdict contained detailed findings and conclusions to explain its decisions regarding damages and fault. Judgment was entered in September 1998. Luna Tech then paid the non-Stout plaintiffs $100,000, and it paid the Stouts $900,000, which is in trust pending resolution of this litigation. The allocation of over $1,400,000 in fault to the employer (25% of $5,616,641) exceeded the Stout’s $900,000 recovery from Luna Tech.

¶ 5 After the judgment had become final, the Stouts gave the Fund its first notice of the high/low agreement, the trial, and the judgment, and they told the Fund that its lien had been extinguished by virtue of Aitken v. Industrial Commission, 183 Ariz. 387, 904 P.2d 456 (1995), in which the Arizona Supreme Court declared, “We now hold that a carrier may assert a lien on a third party recovery only to the extent that the compensation benefits paid exceed the employer’s proportionate share of the total damages fixed by verdict in the action.” Id. at 392, 904 P.2d at 461. The Fund continued to assert its lien rights.

¶ 6 In November 1998, the Stouts sued the Fund once again, seeking a judgment declaring that the Fund’s lien was extinguished and a determination of the Fund’s future credit. The Fund filed a counterclaim seeking a declaration that the Stouts’ settlement with Luna Tech was unauthorized and that the Stouts’ trial with Luna Tech was the sort of “artful contrivance” that does not defeat a workers’ compensation lien, for policy reasons stated in Grijalva v. Arizona State Compensation Fund, 185 Ariz. 74, 77, 912 P.2d 1303, 1306 (1996) (holding that “ ‘artful contrivances’ should not be permitted to reduce or extinguish legitimate hen rights”).

¶ 7 The parties filed many motions for summary judgment. As relevant here, the trial court ruled that (1) the Fund’s challenge to the judgment was not an impermissible collateral attack, (2) the high/low agreement was an unauthorized settlement pursuant to Arizona Revised Statutes (“A.R.S.”) section 23-1023(C) (1995), (3) the trial was an artful contrivance pursuant to Grijalva, and (4) the Fund’s lien attached to the entire $900,000 (plus interest) minus reasonable attorneys’ fees and costs. We affirm.

STANDARD OF REVIEW

¶ 8 On appeal from summary judgment we determine de novo whether genuine issues of material fact exist and whether the trial court erred in its application of the law. Gonzalez v. Satrustegui, 178 Ariz. 92, 97, 870 P.2d 1188, 1193 (App.1993). We view the evidence in the light most favorable to the party opposing the motion. Hill Shafer P’ship v. Chilson Family Trust, 165 Ariz. 469, 472, 799 P.2d 810, 813 (1990).

DISCUSSION

1. Collateral Attack

¶ 9 In arguing that the Fund is bound by the Stout v. Luna Tech judgment, the Stouts rely on cases such as Gilbreath v. St. Paul Fire & Marine Insurance Co., 141 Ariz. 92, 685 P.2d 729 (1984), and Walker v. Davies, 113 Ariz. 233, 550 P.2d 230 (1976), which hold that a judgment cannot be collaterally attacked, even for fraud, unless it is “void on its face.”

¶ 10 The cited cases, however, involve attacks on a judgment rendered in a prior proceeding in which the attacker was either a party to the prior proceeding or closely asso[303]*303dated with such a party.1 In contrast, the Fund was not a party to the Stout v. Luna Tech action, and it had no duty to defend any party in that action. The question arises, however, whether suffident commonality of interest existed between the Fund and a party to the Stout v. Luna Tech litigation that the Fund’s interests were adequately represented there.

¶ 11 In the typical third-party action arising out of an industrial accident, a commonality of interest does exist between the plaintiff and the workers’ compensation carrier, for the plaintiff has every incentive to maximize the percentage of fault allocated to the third-party defendant. In such eases, the plaintiff necessarily has every incentive to minimize the percentage of fault allocated to the employer, for any fault assigned to the employer will typically reduce that assigned to the third-party defendant.

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Cite This Page — Counsel Stack

Bluebook (online)
44 P.3d 178, 202 Ariz. 300, 372 Ariz. Adv. Rep. 14, 2002 Ariz. App. LEXIS 58, Counsel Stack Legal Research, https://law.counselstack.com/opinion/stout-v-state-compensation-fund-arizctapp-2002.