Gonzalez v. Dep't Of Labor

• Decision Date: 22 June 2010
• Docket Number: No. 09-5195.,09-5195.
• Citation: 609 F.3d 451
• Parties: Richard F. GONZALEZ and Rachel Gonzalez, His Wife, Appellantsv.DEPARTMENT OF LABOR and Hilda L. Solis, Secretary, Department of Labor, Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

609 F.3d 451

Richard F. GONZALEZ and Rachel Gonzalez, His Wife, Appellantsv.DEPARTMENT OF LABOR and Hilda L. Solis, Secretary, Department of Labor, Appellees.

No. 09-5195.

United States Court of Appeals District of Columbia Circuit.

Argued March 18, 2010.

Decided June 22, 2010.

Rehearing En Banc Denied Aug. 26, 2010.

Appeal from the United States District Court for the District of Columbia (No. 1:07-cv-00593).

Joseph M. Hannon Jr. argued the cause for the appellant.

Alan Burch, Assistant United States Attorney, argued the cause for the appellee. R. Craig Lawrence, Assistant United States Attorney, was on brief.

Before: SENTELLE, Chief Judge, HENDERSON and BROWN, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge:

Rachel Gonzalez (Rachel) was injured in the course of federal employment. She received compensation for her injuries from the Department of Labor (Labor or DOL) under the Federal Employees' Compensation Act (FECA), 5 U.S.C. §§ 8101 et seq. She and her husband Richard Gonzalez (Richard) later brought suit against allegedly liable private third parties, ultimately reaching a settlement. Labor demanded reimbursement from the settlement proceeds. The Gonzalezes challenged Labor's demand in the district court and the district court granted summary judgment to Labor. We affirm.

I.

On June 11, 1997 an elevator's sudden stop injured Rachel at the United States Embassy in Mexico, where she was working. She filed a claim under FECA for injuries including “abdominal laceration, pelvic cyst, aggravation of pelvic adhesions, bilateral pulmonary embolism, left kidney infection, intracranial hematoma, emergency laparatomy and prolonged post-traumatic stress disorder.” R.G. v. Dep't of State, Decision and Order, Docket No. 06-369, at 1-2 (U.S. Dep't of Labor Employees' Comp.App. Bd. Dec. 13, 2006). Labor accepted the claim and paid her benefits, which continued as of this appeal's outset.

On March 21, 2000 the Gonzalezes brought suit in the District of Columbia Superior Court (Superior Court), alleging two companies' negligence in servicing the elevator caused Rachel's injuries and Richard's loss of consortium. The defendants were Amtech Elevator Services, Inc. (Amtech) and Internacional de Elevadores, S.A. de C.V. (IDESA). Throughout the relevant period Amtech was a subsidiary of an American company named ABM Industries, Inc. (ABM). IDESA, a Mexican company, was also an ABM subsidiary from 1990 until 1996.

If a federal employee receives FECA benefits as the result of an injury for which a third party is liable, Labor is entitled to share in recovery from the third party. 5 U.S.C. § 8132; 20 C.F.R. § 10.710; see United States v. Lorenzetti, 467 U.S. 167, 168, 173-74, 104 S.Ct. 2284, 81 L.Ed.2d 134 (1984). With that in mind, after filing suit against the elevator companies, J. Michael Hannon, the Gonzalezes' lawyer, wrote a letter to Labor proposing that it join the litigation. He suggested that, rather than relying on its reimbursement rights under FECA, Labor should invoke a preexisting indemnity agreement between the United States and the elevator companies. According to him, “By asserting its indemnity rights, the United States would recover every dollar paid [to Rachel]; whereas, as a subrogee under FECA that would not likely be the outcome.” Letter from Hannon to Jeffrey Nesvet, Deputy Associate Solicitor, Labor, at 2 (Mar. 23, 2000).

Labor did not join the lawsuit. Instead, it directed Rachel to continue pursuing her own action against the elevator companies. See 5 U.S.C. § 8131(a)(2) (authorizing Secretary of Labor to require FECA beneficiary to prosecute action against third party in his own name). It also requested that the Gonzalezes' lawyer “contact [its] office prior to accepting any settlement in order to obtain current information on the amount of compensation paid by the United States and to obtain [its] approval of any settlement where such approval is required.” Letter from Augustus Banks, III, Paralegal Specialist, Labor, to Hannon, at 1 (June 7, 2002); see 5 U.S.C. § 8132 (“No court, insurer, attorney, or other person shall pay or distribute to the beneficiary or his designee the proceeds of such suit or settlement without first satisfying or assuring satisfaction of the interest of the United States.”).

The litigation proceeded and, on September 25, 2002, the Superior Court dismissed all of the Gonzalezes' claims against IDESA for acts and omissions occurring after ABM sold IDESA in 1996; the court held that it did not have personal jurisdiction over IDESA post-sale. The Gonzalezes appealed that decision ¹ while also pursuing settlement negotiations with Amtech and its parent company, ABM.

During the negotiations the Gonzalezes' lawyer consulted Labor to discuss the effect of Rachel's FECA-beneficiary status on a possible settlement. On February 20, 2003 he wrote to Labor to “request that any settlement obtained from [ABM and Amtech] be treated as a payment to Mr. Gonzalez for his loss of consortium claim,” leaving Labor's reimbursement from Rachel herself entirely contingent on a future recovery from post-sale IDESA, whose dismissal they were appealing. Letter from Hannon to Catherine P. Carter, Counsel, Labor, at 1. A Labor lawyer responded eight days later, writing, “I am not aware of any case in which we have allowed an entire recovery against one defendant to be allocated to loss of consortium” and concluding that such an approach “is not in the interests of the United States.” E-mail from Catherine Carter, Counsel for Claims and Compensation, Labor, to Hannon, at 1-2 (Feb. 28, 2003). She made clear that Labor “must approve any proposed deduction from the gross recovery attributing a portion of the settlement or judgment to damages for loss of consortium.” Id. at 1. She also made clear that Labor's typical practice was to allocate twenty-five per cent of a joint settlement to a loss of consortium claimant, but that Labor would entertain arguments for a higher allocation and would honor a different allocation prescribed by a judge or jury.

Approximately two months later the Gonzalezes executed a “Confidential Settlement and Joint Tortfeasor Release and Indemnity Agreement” (Settlement Agreement or Agreement) with ABM and Amtech. Settlement Agreement at 1 (May 8, 2003). The Agreement stated that it is “by and between Richard F. Gonzalez and Rachel Gonzalez (‘Plaintiffs')” on the one hand and ABM and Amtech on the other. Id. It recited that “Plaintiffs and Defendants ABM and Amtech wish [ed] to settle fully and finally all Plaintiffs' claims against ABM and Amtech.” Id. at 2. It also recited that the Gonzalezes “wish[ed] to” release all claims against IDESA arising before ABM sold it in 1996. Id. at 3. In return, ABM and Amtech agreed to pay “Plaintiffs” $625,000 in the form of a check payable to their lawyer's escrow account. Id. ¶ 1. The Agreement also provided that the Gonzalezes did not release their claims against IDESA arising post-sale. But post-sale IDESA was not a party to the Agreement, having been dismissed from the case for lack of personal jurisdiction.

The Settlement Agreement also addressed Rachel's duty to reimburse Labor for her workers' compensation benefits. It provided that “Plaintiffs shall have sole responsibility for ... determining whether any amount of the settlement is owed to the Department of Labor.” Id. ¶ 10. Then, in paragraph 13, it stated:

Defendants understand that Plaintiffs as between themselves and in consultation with their attorneys have allocated the consideration paid under this Agreement to Richard Gonzalez whose claims will be dismissed in their entirety with prejudice. Rachel Gonzalez shall continue to prosecute her claim for damages only against IDESA for post-sale claims. This decision is entirely the responsibility of Plaintiffs and their attorneys and shall not otherwise affect their promises contained herein.

After the settlement Labor told the Gonzalezes' lawyer that Rachel was required to reimburse it for some or all of the $216,266.86 it had disbursed to her by that time. It requested that he file the necessary paperwork to calculate the exact amount owed. He refused, asserting that the applicable laws and regulations do “not allow the Department to claim any of the $625,000 settlement that satisfies Richard Gonzalez's consortium claim.” Letter from Hannon to Jeffrey Nesvet, Deputy Associate Solicitor for Employment Benefits Labor, at 3 (June 19, 2003). According to him, “Only recovery later obtained from IDESA ... would be available in satisfaction of the lien.” Id. In response, Labor reviewed the Settlement Agreement and concluded that the defendants had paid the settlement proceeds jointly to Richard and Rachel in exchange for both Gonzalezes releasing their respective claims. Thus, it concluded, Rachel was required to reimburse Labor with some of the proceeds. It repeatedly requested that the Gonzalezes' lawyer file FECA paperwork on her behalf in order to determine the required reimbursement. He repeatedly failed to do so. Then, on October 28, 2004, he requested that Labor issue a final, appealable determination as to her reimbursement obligation.

On February 10, 2005 the Office of Workers' Compensation Programs (OWCP) issued a Notice of Decision, deciding (1) the settlement proceeds had been jointly paid to Rachel and Richard and (2) pursuant to Labor's regulations and procedures regarding allocation of joint settlements, Richard was entitled to retain twenty-five per cent, and no more, of the settlement proceeds as compensation for his loss of consortium. The OWCP allocated the remaining seventy-five per cent of the settlement proceeds-$468,750-to Rachel. It then calculated that, from that amount, Rachel was required to pay Labor $152,091.16.² Rachel appealed the OWCP's decision to the Employees' Compensation Appeals Board, which affirmed it on December 13, 2006....