LaBorde v. McKesson & Robbins, Inc.

• Decision Date: 25 July 1968
• Citation: 70 Cal.Rptr. 726,264 Cal.App.2d 363
• Court: California Court of Appeals Court of Appeals
• Parties: Christel LaBORDE, Plaintiff and Respondent, v. McKESSON & ROBBINS, INC., and Munson G. Shaw Company, a Division of National Distillers & Chemical Corporation, Defendants and Respondents. Eldorado Insurance Company, a corporation, successor to Eldorado Insurance Exchange, an inter-insurance exchange, Intervenor and Appellant. Civ. 11622.

Page 726

70 Cal.Rptr. 726

264 Cal.App.2d 363

Christel LaBORDE, Plaintiff and Respondent, v. McKESSON & ROBBINS, INC., and Munson G. Shaw Company, a Division of National Distillers & Chemical Corporation, Defendants and Respondents.

Eldorado Insurance Company, a corporation, successor to Eldorado Insurance Exchange, an inter-insurance exchange, Intervenor and Appellant.

Civ. 11622.

Court of Appeal, Third District, California.

July 25, 1968.

Hearing Denied Sept. 18, 1968.

Jones, Lamb, Jarboe & Boli, Sacramento, for plaintiff-respondent.

McLaughlin, Russell, McCarthy & Kaelin, Sacramento, for defendants-respondents.

Kiernan & Misciagna, San Francisco, for intervenor-appellant.

PIERCE, Presiding Justice.

Plaintiff Christel LaBorde, a cocktail waitress employed by Zim's Taraval, suffered a work-induced injury. The employer's compensation carrier, Eldorado Insurance Exchange (intervenor-carrier, hereinafter referred to as 'carrier') paid workmen's compensation benefits. The injury occurred under circumstances involving alleged third party tortfeasors, McKesson & Robbins, Inc., and Munson G. Shaw Company, a Division of National Distillers & Chemical Corporation. Plaintiff sued the alleged third party tortfeasors. ¹ The answer of defendants denied negligence and alleged plaintiff's contributory negligence. A complaint in intervention by carrier for reimbursement of the compensation benefits paid was filed. ² Plaintiff and carrier were represented here by separate attorneys. Defendants in their answer to the complaint in intervention raised the issue of the concurrent negligence of plaintiff's employer, Zim's Taraval. The action was tried for two days and part of a third day. We do not deem it necessary to review herein the evidence produced in detail. Forceful evidence supported the essential allegations of the complaint. ³ There was also substantial evidence of concurrent negligence on the part of the employer's bartender proximately contributing to the plaintiff's injury. ⁴ By the afternoon of the third day, October 19, 1966, presentation of plaintiff's case had been concluded except for the testimony of medical experts.

A discussion was held in chambers. The attorney for defendants informed the court (with confirmation by plaintiff's attorneys) that their respective clients had reached a compromise settlement as to liability and damages insofar as those issues related to plaintiff's general damages 'but without giving any regard, whatever, for the expenditures made by the compensation insurance carrier, which is a plaintiff in intervention. Leaving the issues of liability as between the plaintiff in intervention and the two defendants * * * open.' It was clear from this discussion that defendants' counsel was representing that plaintiff and defendants had settled all that portion of plaintiff's claim which plaintiff individually was entitled to recover leaving unsettled only the issue of carrier's right to reimbursement for its outlay. The amount of that outlay was $3,734.37 for temporary disability and $3,393.62 for medical care. Defendants' attorney also stated he was willing to stipulate with the attorney for carrier as to the expenditures it had made. The discussion in chambers continued the following morning. It centered upon the difficulties of construing Labor Code sections 3859 and 3860 in the light of Witt v. Jackson (1961) 57 Cal.2d 57, 72, 17 Cal.Rptr. 369, 366 P.2d 641.)

Section 3859 states that '(n)o release or settlement of any claim under this chapter as to either the employee or the employer is valid without the written consent of both. The consent of both the employer and employee filed in court in writing together with the approval of the court, is sufficient in any action or proceeding where such approval is required by law.' Section 3860 is longer. As pertinent here it provides in subdivision (a) that no 'settlement * * * with or without suit, is valid or binding as to any party thereto without notice to * * * the employer * * * with opportunity to the employer to recover the amount of compensation he has paid * * *.' Subdivision (b) of the section states in part: 'The entire amount of such settlement, with or without suit, is subject to the employer's full claim for reimbursement * * *.' Standing by themselves, sections 3859 and 3860 would justify the conclusion that a settlement by an employee without the consent of the employer or without reimbursing him in full could not be made. But the sections cannot be read in a vacuum. After their enactment as worded above two important court-made rules were announced.

Witt v. Jackson, supra, 57 Cal.2d 57, 72, 17 Cal.Rptr. 369, 366 P.2d 641, stands in part for a rule that a concurrently negligent employer (and therefore him compensation carrier) cannot recover reimbursement for compensation benefits made to an injured employee. Recovery is barred whether the reimbursement is sought (1) by filing a lien against a judgment recovered by an employee suing the third party tortfeasor alone, or (2) by intervening in the employee's action, or (3) by an independent action brought by the employer against the third party. Witt also asserts another rule. The employee may not have double damages on his claim. Since he has already recovered his 'special' damages as compensation benefits he may not receive them again from the third party tortfeasor.

In the case before us carrier refused to consent to the settlement mentioned above. The court had indicated that it might consider a motion by carrier for an order that the stipulation was invalid. The record is unclear on this point. It is completely clear, however, that carrier did not seek to set aside the compromise. It adopted another tactic. It moved for an order that the settlement funds be declared to be held in trust; it moved for leave to amend its complaint in intervention to assert a lien against any recovery of plaintiff against defendants; it filed a purported lien. The court denied the motions and directed carrier to proceed with the trial (before the waiting jury) on the sole remaining issue--the employer's concurrent negligence. Carrier did not do so. Instead, it moved for a dismissal of its complaint in intervention--with prejudice. That motion the court granted. Four more motions were then made by carrier: (1) motion for an order imposing a first lien on the plaintiff's recovery; (2) motion allegedly under section 3860 for an order allocating expenses and fees following settlement; (3) motion allegedly under section 3859 for production of the settlement agreement; and (4) motion for order restraining defendant from transferring settlement funds to plaintiff and restraining plaintiff from dissipating those funds. The appeal followed denial of these motions.

The issue we determine on this appeal is whether a settlement between plaintiff-employee and third party tortfeasors is valid under the circumstances described. We hold that it is. Sections 3859 and 3860 were not designed to cover this Witt v. Jackson situation. They were not intended to block a settlement between an injured employee and a third party tortfeasor where the concurrent negligence of the employer has been made an issue in the litigation and where the settlement is carefully drawn to leave intact all of the rights of the employer (and his compensation carrier).

THE REASONS FOR PERMITTING THE SETTLEMENT MADE HERE

This appears to be a case of first impression in California. Smith v. Trapp (1967) 249 Cal.App.2d 929, 58 Cal.Rptr. 229, which we will discuss below, held a settlement between an employee and a third party tortfeasor to which an intervening compensation carrier objected was invalid. There are facts in Smith similar to the facts of this case. But there are also facts which we believe to be distinguishing. There are also statements in Smith with which we cannot agree. Our discussion, however should be initiated with a detailed analysis of the steps taken here already described and the consequences of those steps.

First, we consider the factual background at the time the compromise was entered into between plaintiff and defendants. All parties were before the court: the injured employee-plaintiff, the third party tortfeasors-defendants, and the employer represented by carrier. The case was being tried to a jury. The issues being tried were not only the negligence of the third party tortfeasors, whether it was a proximate cause of the injury, and the possible contributory negligence of plaintiff. The questions of the existence of concurrent negligence of the employer's agent, the bartender, and whether such negligence if found was a proximate cause were also before the jury. Incidentally, as we read the record and as we have indicated above, a strong case both of negligence of defendants and concurrent negligence of the bartender, all contributing proximately to the injury, had been made.

Secondly, the compromise was not a complete settlement of the litigation. It did not cover all of plaintiff's damages. It did not settle the part of plaintiff's claim for which she had received workmen's compensation benefits from carrier. As to that part of the claim plaintiff was no longer interested. Under Witt v. Jackson, supra, she could recover them. She would have been getting double damages since she had already been paid therefor. Carrier may or may not have been entitled to recovery of those amounts. That right, again under Witt v. Jackson, supra, depended upon the issue of the concurrent negligence of the employer's agent. That issue was still pending before a waiting jury. Some evidence had been heard but both defendants and carrier were before the court and trial could have been continued until all material evidence on the issue had been heard.

We can perceive of no respect in which carrier's interests were prejudiced by the settlement. Every aspect of the settlement was fair. The cards were on the table....