Gallagher v. Lenart, 103522.

Citation226 Ill.2d 208,874 N.E.2d 43
Decision Date09 August 2007
Docket NumberNo. 103522.,103522.
PartiesJames GALLAGHER et al., Appellants, v. Jaroslaw Robert LENART et al., Appellants (Rail Terminal Services, LLC, Appellee).
CourtSupreme Court of Illinois
874 N.E.2d 43
226 Ill.2d 208
James GALLAGHER et al., Appellants,
Jaroslaw Robert LENART et al., Appellants
(Rail Terminal Services, LLC, Appellee).
No. 103522.
Supreme Court of Illinois.
August 9, 2007.

[874 N.E.2d 45]

Michael W. Rathsack (Jonathan Kurasch, of counsel), David E. Neumeister, of Querrey & Harrow, Ltd., all of Chicago, for appellants.

William P. Ryan, Terry L. Welch, of Marwedel, Minichello & Reeb, P.C., Chicago, for appellee.


Justice GARMAN delivered the judgment of the court, with opinion:

Plaintiffs, James Gallagher and his wife, filed suit against defendants Jaroslaw Robert Lenart and Pacella Trucking Express, Inc., based on injuries Gallagher sustained when the truck he was operating for his

874 N.E.2d 46

employer, Rail Terminal Services, LLC, collided with the truck Lenart was operating for Pacella. After plaintiffs settled their lawsuit against defendants, Rail Terminal sought to enforce its workers' compensation lien against the settlement proceeds allocated to Gallagher (820 ILCS 305/5(b) (West 2004)). The circuit court of Cook County found that Rail Terminal had waived its lien when it settled Gallagher's workers' compensation claim. Accordingly, the court granted defendants' motion to adjudicate third-party claims and issue settlement drafts. Rail Terminal appealed, and the appellate court reversed and remanded, holding that Rail Terminal had not waived its workers' compensation lien, and that the circuit court erred in granting defendants' motion. 367 Ill.App.3d 293, 305 Ill.Dec. 208, 854 N.E.2d 800. For the reasons that follow, we affirm the judgment of the appellate court.


On April 10, 2001, James Gallagher was operating a truck for his employer, Rail Terminal Services, LLC, when his truck collided with another truck driven by Jaroslaw Robert Lenart, an employee of Pacella Trucking Express, Inc. Gallagher injured his spine as a result of the accident and was required to undergo surgery and take pain medication.

After the accident, Gallagher filed a workers' compensation claim against Rail Terminal. Initially, Rail Terminal paid him $24,903.51 in temporary total disability benefits and $53,392.21 in medical expenses. Then, on July 28, 2003, the parties settled Gallagher's claim for an additional lump-sum payment of $150,000.

The parties executed two documents as part of the settlement. The first was entitled "Illinois Industrial Commission Settlement Contract Lump Sum Petition and Order." The settlement contract provided, in relevant part:

"Respondent [Rail Terminal] to pay the petitioner [Gallagher] $150,000.00 in full and final settlement of all claims under the Workers' Compensation Act for injuries allegedly incurred on or about April 10, 2001 and any and all results, developments or sequale [sic], past, present or future resulting from this accident. Respondent denies these injuries are compensable and this settlement is made to settle those issues as a purchase of the peace against any and all claims of temporary total compensation, permanent partial disability and medical, surgical [or] hospital expenses, past, present or future. Review under Sections 19(h) and 8(a) are waived by the petitioner. The settlement is made in lieu of any additional compensation beyond the date of approval of this contract and includes only payment of temporary total compensation in the amount of $58,049.70, unpaid medical bills in the amount of $388.02, and the aforementioned purchase of the peace. Respondent is not responsible for any outstanding medical bills not submitted for payment prior to approval of this settlement contract."

The second document the parties executed was entitled "Resignation Agreement." It was contingent upon the workers' compensation arbitrator's approval of the settlement contract described above. In its recitals, the resignation agreement acknowledged that Gallagher had a pending workers' compensation claim against Rail Terminal, and that the claim was being settled. It further acknowledged that, as part of the settlement, Gallagher would voluntarily resign from his position with Rail Terminal and waive all claims arising from his employment. The agreement explained that the basis for the settlement was that Rail Terminal had "no position

874 N.E.2d 47

available within [Gallagher's] permanent restrictions." Thus, "in consideration of [Rail Terminal's] agreement to pay [Gallagher] the sum of $1.00 * * * in a lump sum after an Order issued approving the settlement of [Gallagher's] workers' compensation claim," Gallagher agreed to be bound by a series of specific provisions.

First, Gallagher agreed to the sufficiency of the stated consideration. Second, Gallagher agreed that, by signing the resignation agreement, he was "voluntarily resigning his employment with [Rail Terminal]." Third, Gallagher agreed to "refrain from suing [Rail Terminal], or authorizing any complaint or suit against [Rail Terminal], on his behalf for any action of any kind or character, in law or equity, suspected or unsuspected, arising out of or related to his employment with [Rail Terminal]." Fourth, Gallagher agreed not to "seek reinstatement, future employment or return to active employment status with [Rail Terminal]." Fifth, Gallagher agreed to "release[ ] and forever discharge[ ]" Rail Terminal from any and all claims arising out of his employment with Rail Terminal, including claims based on a variety of statutes and legal theories specifically enumerated in the resignation agreement. The latter provision concluded by stating that it did "not apply to claims, if any, for which releases are prohibited by applicable law or which arise after the date that [Gallagher] executes his agreement."

The resignation agreement also contained the following clause:

"This Agreement does not constitute an admission by Employer of any liability or wrongdoing but it is intended to resolve in good faith any existing or potential disputes or claims arising out of Employee's relationship and separation with Employer."

While Gallagher's workers' compensation claim was still pending, he filed a personal injury action against defendants Lenart and Pacella in the Cook County circuit court. Gallagher sought damages for the injuries he suffered as a result of the accident. In addition, in an amended complaint, his wife raised a loss of consortium claim.

On November 20, 2003, defendants filed a third-party action against Rail Terminal seeking contribution pursuant to the Joint Tortfeasor Contribution Act (740 ILCS 100/1 et seq. (West 2002)). Defendants alleged that Rail Terminal failed to properly train and supervise Gallagher. Rail Terminal filed a motion for summary judgment arguing that it did not fail to train or supervise Gallagher, and that no additional training or supervision would have prevented the accident. The circuit court granted Rail Terminal's motion.

Subsequently, on September 16, 2005, defendants reached a settlement with plaintiffs. They agreed to pay Gallagher $125,000 for his personal injury claim and pay his wife $225,000 for her loss-of-consortium claim.

Shortly thereafter, Rail Terminal filed a motion to intervene in the personal injury action. It also filed a motion to set aside the allocation of the settlement proceeds and reallocate them. Rail Terminal's purpose for intervening was to assert its workers' compensation lien under section 5(b) of the Workers' Compensation Act (820 ILCS 305/5(b) (West 2004)). Section 5(b) provides, in relevant part:

"Where the injury or death for which compensation is payable under this Act was caused under circumstances creating a legal liability for damages on the part of some person other than his employer to pay damages, then legal proceedings may be taken against such other person to recover damages notwithstanding such employer's payment

874 N.E.2d 48

of or liability to pay compensation under this Act. In such case, however, if the action against such other person is brought by the injured employee * * * and judgment is obtained and paid, or settlement is made with such other person, * * * then from the amount received by such employee * * * there shall be paid to the employer the amount of compensation paid or to be paid by him to such employee * * *. * * *

* * *

* * * [T]he employer may have or claim a lien upon any award, judgment or fund out of which such employee might be compensated from such third party.

* * * The employer may[ ] at any time [after the filing of a third-party action] join in the action upon his motion so that all orders of court after hearing and judgment shall be made for his protection." 820 ILCS 305/5(b) (West 2004).

Rail Terminal claimed its lien amounted to $228,295.72 based on the $24,903.51 it paid in temporary total disability benefits, the $53,392.21 it paid in medical expenses, and the $150,000 lump sum it paid pursuant to the settlement contract. In both of its motions, Rail Terminal stated that it did not participate in or approve of the settlement between defendants and plaintiffs. Furthermore, it claimed that plaintiffs had structured the settlement to circumvent its workers' compensation lien by allocating 64.3% of the settlement proceeds to Gallagher's wife.

On October 7, 2005, in response to Rail Terminal's motions, defendants filed a motion to adjudicate third-party claims and issue settlement drafts. They argued that language in the settlement contract between Rail Terminal and Gallagher constituted a waiver of Rail Terminal's workers' compensation lien. In support of this contention, defendants relied on Borrowman v. Prastein, 356 Ill.App.3d 546, 292 Ill.Dec. 459, 826 N.E.2d 600 (2005), where the Fourth District of the appellate court concluded that an employer that entered into a settlement contract similar to the one between Rail Terminal and Gallagher had given up its right to assert its workers' compensation lien.

Plaintiffs joined defendants' motion and filed...

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