Draper v. Travelers Insurance Company
| Decision Date | 16 July 1970 |
| Docket Number | No. 222-69.,222-69. |
| Citation | 429 F.2d 44 |
| Parties | Delbert M. DRAPER, Jr., A. Wally Sandack and Herschel J. Saperstein, copartners, dba Draper, Sandack & Saperstein, and Calvin W. Rawlings, Brigham E. Roberts, Wayne L. Black, John L. Black and Richard C. Dibblee, copartners, dba Rawlings, Wallace, Roberts & Black, and Stanley V. Litizzette, Appellees, v. The TRAVELERS INSURANCE COMPANY, a Connecticut corporation, Appellant. |
| Court | U.S. Court of Appeals — Tenth Circuit |
Marvin J. Bertoch, Salt Lake City, Utah (Stephen B. Nebeker, of Ray, Quinney & Nebeker, Salt Lake City, Utah, on the brief), for appellant.
David K. Watkiss, of Watkiss, Campbell & Cowley, Salt Lake City, Utah, for appellees.
Before MURRAH, Chief Judge, and BRIETENSTEIN and SETH, Circuit Judges.
This is an action for attorneys' fees. It was brought by the attorneys who in 1965 settled a negligence suit brought by them for workmen's compensation claimants against Texas Gulf Sulphur Company and the United States. Attorneys' fees are here sought from the workmen's compensation insurance carrier on the ground that it benefitted from the settlement of the negligence action. The claimants were the heirs and representatives of seventeen miners who were killed in a mine explosion while working as employees of a company which contracted with the Texas Gulf Sulphur Company. Workmen's compensation awards had theretofore been made to the heirs, and the damage suit was against third parties alleged to have negligently caused the accident.
Under the Utah statute, section 35-1-62, Utah Code Ann.(1953) such suits against a negligent third party are authorized, and if recovery is had its division between the employee and the compensation carrier is therein provided for. Under the statute only one suit is brought against a third party to include both the claim of the compensation carrier for reimbursement and the basic damage action of the claimant. The suit may be brought by the insurance carrier or by the claimant, and it is maintained only in the name of the party commencing it.
The plaintiff-appellees here are the attorneys who brought such a combined action and obtained an agreed-upon recovery. They here claim fees against The Travelers Insurance Company for services relating to the settlement which they assert benefitted it as the compensation carrier.
This case arose by reason of a change in interpretation of the above cited section of the statute by the Utah Supreme Court. In McConnell v. Commission of Finance, 13 Utah 2d 395, 375 P.2d 394, decided in 1962, the court held that the portion of the section relating to the division of the recovery obtained in such a suit against a third party did not permit the award by the court of attorneys' fees attributable to that part of the recovery going to the State Insurance Fund to reimburse it for compensation payments it had already made to the plaintiff. The decision was strictly one of statutory construction. The third party action from which the issue on this appeal arose was settled in November and December 1965. In April 1967 the Utah Supreme Court reversed the McConnell case and held that the correct construction of the Act (section 35-1-62, Utah Code Ann.1953) permitted reasonable attorneys' fees for plaintiffs' attorneys to be deducted from that portion of a recovery going to reimburse the State Insurance Fund. Based on this reversal in Worthen v. Shurtleff & Andrews, Inc., 19 Utah 2d 80, 426 P.2d 223, the plaintiff attorneys commenced this suit some eighteen months after the settlement of the third party action referred to above.
Both sides moved for summary judgment and the trial court granted judgment for the plaintiffs and computed the fees on the amount of the total compensation award for which the defendant was liable. The defendant insurance company has taken this appeal.
The appellant company asserts that the trial court was in error in granting summary judgment because there were issues of fact, and also because it included the unpaid portion of the award in addition to the paid portion in computing fees; but basically the appellant's position is that the change in law should not be applied retroactively, and that any award of fees must come from the recovery in the original third party action and not in a separate action such as this.
The appellee-attorneys assert that the award of fees was properly made to include the entire award, that the most recent Utah case should be applied retroactively, that the fees need not come out of the recovery, and that there were no fact issues.
Some detailed examination of the events which led to the settlement of the third party suit is necessary.
The record shows that as the trial was about to commence in the action brought by the claimants against Texas Gulf Sulphur and the United States, an offer of settlement from Texas Gulf Sulphur was outstanding. The offer was for the payment of the total sum of $1,200,000.00 to all the claimants. This amount would be divided among them on some basis agreeable to them and from the share of each claimant there would be deducted and paid to the workmen's compensation carrier the amount of compensation such claimant had theretofore received. It was also apparently assumed that the claimants would waive the right to any future compensation payments under the prior award and the carrier would thereby be released. Under the terms of this offer the amount to be received by all of the claimants would be reduced by the total compensation paid which ultimately was about $115,000.00.
On the day the trial in the action against Texas Gulf Sulphur was to start and in the court room, Mr. Delbert M. Draper, Jr., an attorney who represented one group of the claimants, spoke about settlement to Mr. C. Preston Allen, an attorney who was about to participate in the defense of the case. According to the testimony of Mr. Allen, Mr. Draper then said to him, "Pres Mr. Allen, wouldn't you even be willing to waive the comp?" A postponement of the commencement of the trial was then requested to allow time for consideration of this suggestion, and in about an hour a settlement agreement was reached. It would appear that such a remark would not have been directed to Mr. Allen had not Mr. Draper been aware that Mr. Allen could bring about such a waiver by the workmen's compensation carrier. It is apparent from the record also that Mr. Brigham Roberts, an attorney who represented other claimants, was aware of Mr. Allen's position. It appears that the word "comp" as used by Mr. Draper was intended to mean a waiver by the carrier of the right to have returned to it out of the settlement amount the payments theretofore made to the claimants by the compensation carrier, The Travelers Insurance Company. Mr. Allen testified below that "the substance of the settlement was identical with the statement that was made to me by Mr. Draper." The record otherwise supports this statement. Thus the settlement agreed to was that the workmen's compensation carrier would waive recovery of the compensation payments theretofore made to the claimants under the Utah Act, and thus it would not participate in the $1,200,000.00 offer theretofore made by Texas Gulf Sulphur. Thereby the amount offered became the net amount claimants and their attorneys would receive.
The handwritten schedule used for the division of the settlement as prepared by Mr. Allen shortly after an agreement was reached shows the amount theretofore paid to each claimant as workmen's compensation and the amount of the $1,200,000.00 each claimant was to receive, the total being $1,312,429.00. It appears that an additional month's compensation became due and was paid before the settlement was completed and the return of this portion was also waived. This was the settlement agreed upon by the claimants, their attorneys who are the plaintiffs here, The Travelers Insurance Company, and the defendants in the negligence suit, and their insurers.
The settlement agreement was executed. Drafts provided by the Insurance Company of North America, which participated in the settlement as one of the insurers, were sent to Mr. Draper and Mr. Roberts; these with drafts by Texas Gulf Sulphur which were sent to Mr. Draper, payable to him and his clients, made up the $1,200,000.00. With the delivery of the general releases from the claimants the settlement was thus accomplished as agreed upon.
In addition to the execution of the settlement by delivery of the above drafts and releases, the record shows that at the same time The Travelers Indemnity Company sent a set of their drafts to Mr. Draper for his group of clients, and apparently also to the other attorneys. These drafts were for the amounts the claimants had each theretofore received as compensation, and were payable only to the claimants and to The Travelers Insurance Company to which they were to be forwarded after endorsement by the claimants. The drafts were so endorsed by the claimants and sent to the compensation carrier which received the proceeds thereon. These drafts were not part of the agreed settlement in the sense that they represented no change in the amounts each claimant was to receive. They were however a settlement between The Travelers Indemnity Company and The Travelers Insurance Company, each a wholly owned subsidiary of The Travelers Company.
To refer again to the origin of the settlement and the "waiver" of the right of the workmen's compensation carrier to secure a return to it of the compensation payments, it is apparent that these waivers could have only been made in the negligence action by the consent and participation of the workmen's compensation carrier — The Travelers Insurance Company. The interest of this carrier under the Utah Act was included in the suit by the claimants since only one action is brought to include damages and the return of the compensation. The workmen's compensation...
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