McDonald v. EJ Lavino Company

• Decision Date: 20 August 1970
• Docket Number: No. 28402.,28402.
• Parties: Curtis McDONALD, Plaintiff-Appellee, v. E. J. LAVINO COMPANY, Defendant-Appellee, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Workmen's Compensation Carrier, Subrogee and Movant to Intervene-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

430 F.2d 1065 (1970)

Curtis McDONALD, Plaintiff-Appellee, v. E. J. LAVINO COMPANY, Defendant-Appellee, v. UNITED STATES FIDELITY & GUARANTY COMPANY, Workmen's Compensation Carrier, Subrogee and Movant to Intervene-Appellant.

No. 28402.

United States Court of Appeals, Fifth Circuit.

July 31, 1970.

Rehearing Denied August 20, 1970.

Lawrence W. Rabb, Rabb & Corrigan, Meridian, Miss., for appellant.

Robert P. Upchurch, Livingston, Ala., Hugh W. Roberts, Jr., Sam M. Phelps, Phelps & Owens, Tuscaloosa, Ala., for appellee.

Before COLEMAN, GOLDBERG and MORGAN, Circuit Judges.

GOLDBERG, Circuit Judge.

This appeal is the result of a drama played out in an Alabama courtroom against the backdrop of a Mississippi statute. The dramatis personae included an injured employee, his employer's workmen's compensation carrier, a third-party tortfeasor, and lawyers who were never able to reach agreement on how to settle the compensation carrier's subrogation interest. The issue now before us arose when the trial court denied the compensation carrier's motion to intervene filed one day after judgment. The carrier now appeals, challenging the court's conclusion that the motion was not "timely." Despite the fact that the trial court gave this issue careful and extensive consideration, our reading of Rule 24, Federal Rules of Civil Procedure, leads us to the conclusion that the court abused its discretion in denying the intervention. Accordingly, we reverse and remand.

The history of this litigation began on June 24, 1966. On that date Curtis McDonald, an employee of Mid-South Steel Erectors, Inc. (Mid-South), of Meridian, Mississippi, sustained personal injuries while working for his employer on the premises of E. J. Lavino Company, Inc. (Lavino), in York, Alabama. As a result of this accident Mid-South's workmen's compensation carrier, United States Fidelity & Guaranty Company (USF&G), paid McDonald a total of $8,772.19 in benefits.¹

Following the accident McDonald employed counsel to pursue a tort recovery against Lavino. Suit was filed in an Alabama state court on June 20, 1967, and the case was subsequently removed to federal court on motion of Lavino. McDonald's counsel informed USF&G of the filing of the lawsuit because USF&G, having paid $8,772.19 to McDonald in workmen's compensation benefits, had a subrogation interest in any recovery McDonald might obtain from Lavino.

The record reveals that additional correspondence between McDonald's attorneys and counsel for USF&G took place from the time suit was filed until the time of trial. The details of the communications between the attorneys are unimportant for our purposes, but two basic facts deserve mention: McDonald's lawyers never expressly requested that USF&G intervene, and they never expressly requested that USF&G not intervene. Unencumbered by any specific request, counsel for USF&G apparently concluded that intervention was not necessary to protect USF&G's subrogation interest.

The case was set for trial on May 5, 1969. On that date attorneys for McDonald and Lavino informed the court that they had agreed upon a settlement in the amount of $19,100.00. This settlement was considered and approved by the court. The jury was instructed to enter a verdict for McDonald in the amount of the settlement, and after verdict judgment was entered accordingly.

Lawrence W. Rabb, USF&G's attorney, was present in the courtroom during the proceedings on May 5, but he took no part in those proceedings, and the court was not formally notified of the subrogation claim of USF&G. Later the same day, however, after conferring with counsel for McDonald, Rabb apparently came to the conclusion that the subrogation interest of USF&G would not be protected unless USF&G intervened in McDonald's lawsuit. Consequently early the next morning he filed a motion to intervene. The court took his motion under advisement and asked him to file affidavits in support of the motion. In accordance with the court's request, two affidavits were filed on May 16, one signed by Rabb and the other signed by Troy E. Barnes, a claim adjuster employed in the Meridian, Mississippi, office of USF&G.

Not satisfied with the affidavits, the court held an extended hearing on July 18, 1969, to determine whether to grant the motion to intervene. At the conclusion of the hearing the court announced:

"I will enter the proper findings of fact and conclusions of law during the latter part of next week, and will hold that the motion to intervene was not a timely motion. That has nothing to do with whether or not there were or were not subrogation rights between U.S.F.&G. and the plaintiff, but simply that the motion to intervene wasn\'t timely filed, and will be dismissed."

On July 29, 1969, the court filed its memorandum opinion. We quote the opinion in full:

"This cause, coming on to be heard, was submitted for the judgment of the court on the motion filed in behalf of United States Fidelity & Guaranty Company for leave to intervene as a party plaintiff herein, the affidavits of Troy Barnes and Lawrence W. Rabb in support thereof, the oral testimony adduced in open court on the 18th day of July, 1969, and the oral arguments of counsel.

"A chronology of significant events occurring in the somewhat tortuous course of this case through the courts will place the issue sub judice in proper perspective. Curtis McDonald, an employee of Mid-South Steel Erectors, Inc., of Meridian, Mississippi, sustained severe personal injuries on June 24, 1966, when he fell from a ladder on the premises of E. J. Lavino Company, Inc. in York, Alabama, while engaged in the performance of duties for his employer. United States Fidelity and Guaranty Company (U.S.F. & G.), Mid-South's compensation carrier, paid a total sum of $8,772.19 in compensation benefits and hospital and medical expenses, as evidenced by his final receipt, dated March 1, 1968.

"Mr. James G. McIntyre, of Jackson, Mississippi, who represented McDonald in his compensation claims, referred his claim against Lavino as a third-party tort feasor to Mr. Robert T. Upchurch, a practicing attorney in Livingston, Alabama. As early as March 21, 1967, U. S. F. & G. had notice of the potential liability of Lavino and corresponded with it with reference thereto.

"On June 20, 1967, Mr. Upchurch filed a complaint in the Circuit Court of Sumter County, Alabama, naming as defendants E. J. Lavino and Company, Inc., International Minerals and Chemicals, Inc. and two individuals, at least one of whom was a resident citizen of the State of Mississippi.

"On June 11, 1968, such action was removed to this court, after service of process, on the petition of Lavino. There ensued a number of motions and conferences with the court culminating in the elimination of the individuals as parties defendant and a summary judgment in favor of defendant, International Minerals and Chemicals Corporation.

"From conferences with the attorneys involved, the court gained the impression that the issue of liability was clouded with such doubt as virtually to preclude the possibility of settlement. In cooperation with Professor Vastine Stabler of the School of Law of the University of Alabama a case was to be selected for pretrial conference at the Law School and thereafter for trial to a jury in its courtroom. This case was selected for such purpose and set for trial as the first case on Monday, May 5, 1969, commencing the second week of the trial docket.

"At no time, either at the pretrial conference held on April 8, 1969, or on the morning of May 5, 1969, or at any intervening time was the claim of U. S. F. & G. called to the attention of the court.

"At eight o'clock, a.m., on May 5, 1969, Mr. Sam M. Phelps, representing McDonald in this court and Mr. Hugh Roberts, representing Lavino, advised me that on the preceding Saturday they had agreed upon a settlement of this case in the amount of $19,100.00. This agreement was thoroughly considered and approved by the court. When the jury reported and a trial jury was empaneled, the court advised the jury of the compromise agreed upon and of its approval thereof, and instructed the jury that by consent of the attorneys of record for the respective parties the verdict in such amount might be returned.

"Immediately after the receipt of such verdict the court proceeded to determine whether in the next case on the docket there existed challenges for cause as to eighteen members of the jury, and, being satisfied that there were none, instructed such jurors to proceed forthwith to the Law School. Immediately prior to my departure for the Law School Mr. Phelps brought Mr. Rabb into my chambers and introduced him to me. I recognized Mr. Rabb as having been a silent observer in the courtroom at the time the consent verdict was returned.

"Early the following morning Mr. Phelps and Mr. Rabb returned to my chambers before court opened, at which time Mr. Rabb presented me with a motion to intervene in behalf of U.S.F.&G. After some discussion, this motion was taken under advisement and Mr. Rabb was requested to file affidavits with respect to the timeliness of such motion.

"Being concerned with the possibility that, as a matter of trial strategy, U.S. F.&G. had been induced or persuaded not to intervene before trial by counsel representing the plaintiff and dissatisfied with the supporting affidavits, the court set this motion down for oral testimony to supplement such affidavits on July 18, 1969, and directed all attorneys who had appeared of record for McDonald to be present.

"The legal issue is a narrow one. It was conceded that the substantive rights of U.S.F.&G. are governed by the law of Mississippi where compensation was paid. Clearly the right to intervene in federal actions is governed by Rule 24, Federal Rules of Civil Procedure and not by state law. Wright on Federal Courts, Section 75 at page 283. Furthermore, all applications to intervene, whether as of right...