Michigan Mut. Ins. Co. v. Smoot

• Decision Date: 04 April 2001
• Docket Number: Civ. A. No. 00-1026-A.
• Citation: 183 F.Supp.2d 806
• Court: U.S. District Court — Eastern District of Virginia
• Parties: MICHIGAN MUTUAL INSURANCE COMPANY, Plaintiff, v. Wayne Davis SMOOT, Sr. and Debbie Smoot, Defendants.

183 F.Supp.2d 806

MICHIGAN MUTUAL INSURANCE COMPANY, Plaintiff, v. Wayne Davis SMOOT, Sr. and Debbie Smoot, Defendants.

Civ. A. No. 00-1026-A.

United States District Court, E.D. Virginia, Alexandria Division.

April 4, 2001.

Henry Cannon Spalding, III, Sands, Anderson, Marks & Miller, Richmond, VA, for plaintiff.

Christopher P. Schewe, Alexandria, VA, for defendant.

Memorandum Order

LEE, District Judge.

THIS Matter is before the Court on Plaintiff Michigan Mutual's Motion for Summary Judgment and Defendants Wayne and Debbie Smoots' Motion for Summary Judgment. The issues before the Court are (1) whether a claim of unjust enrichment to prevent a double recovery is properly brought against the wife of a worker who has received workers' compensation benefits and a civil damages award; (2) whether the insurance carrier's claim in equity for the imposition of a constructive trust and judgment against a worker who received both workers' compensation benefits and a civil damages award is defeated by the equitable defenses of lack of vigilance, laches, and the statute of limitations; (3) whether a court should impose a constructive trust on a defendant where the plaintiff has not demonstrated that the monies the party seeks can be traced to the defendant's assets; (4) whether summary judgment is appropriate on an unjust enrichment claim where the defendant has introduced evidence of off-setting sacrifices in the form of a waiver of future workers' compensation benefits and of social security set-offs; (5) whether a carrier suing for reimbursement in equity is responsible for a share of the attorney's fees incurred by the worker to obtain tort recovery; and (6) whether the carrier is entitled to attorney's fees for the equity suit.

Upon consideration of the parties' submissions and oral argument, the Court holds the following. First, a claim for unjust enrichment is not proper against the wife of a worker who has received compensation benefits and civil damages. The worker's wife technically has not received a double recovery because the workers' compensation benefits were paid to the worker, not to his wife. Therefore, even though the wife may benefit from both the workers' compensation award and the civil damages award, she is not twice paid for the same injury; only her husband is. Second, the worker cannot defeat the carrier's claim for unjust enrichment in this case using the defenses of lack of vigilance, laches, and statute of limitations. The carrier's immediate pursuit of reimbursement with the Industrial Commission demonstrates vigilance. Relatedly, the carrier's prompt and continuous efforts to obtain reimbursement defeats a laches defense because there was no indication that the carrier abandoned its claim. Furthermore, the worker cannot prevail on laches because the worker has not shown any prejudice that occurred as a result of the carrier's delay in bringing this case. Finally, the statute of limitations defense fails because the carrier brought this suit within two years of the worker's settlement of the third-party action. Third, the Court holds that a constructive trust is not an appropriate remedy where the claimant's money is not directly traceable to the chose in action or property of the defendant. Fourth, summary judgment is not appropriate on an unjust enrichment claim where a dispute remains as to the material fact of whether the consequences of settling outside the Workers' Compensation Act, and refusing to reimburse the carrier, outweigh the benefits of settling in accordance with the Act. The question of whether a defendant has been unjustly enriched is not a question of law, but is a question of fact for a factfinder. Fifth, the carrier must pay its pro rata share of attorney's fees if it seeks to benefit from a worker's tort action recovery. Finally, the Court holds that the carrier is not entitled to attorney's fees for this suit in equity, because this suit to secure reimbursement is pursued independently of the right of subrogation. For these reasons, it is hereby

ORDERED that Defendants Wayne and Debbie Smoots' motion for summary judgment and Plaintiff Michigan Mutual Insurance Company's motion for summary judgment are both GRANTED IN PART and DENIED IN PART. It is further

ORDERED that summary judgment as to Defendant Debbie Smoot is GRANTED, and Debbie Smoot is DISMISSED as a defendant in this case;

ORDERED that summary judgment on the affirmative defenses of lack of vigilance, laches, and the statute of limitations is DENIED;

ORDERED that summary judgment on the impropriety of the imposition of a constructive trust is GRANTED, and that Michigan Mutual may seek only monetary damages as a remedy;

ORDERED that summary judgment on the substance of the unjust enrichment claim is DENIED, as material facts remain as to whether Defendant Wayne Smoot has been unjustly enriched;

ORDERED that summary judgment on the propriety of reducing any recovery awarded to Michigan Mutual by a pro rata share of the percentage the Smoots paid in attorney's fees is GRANTED;

ORDERED that summary judgment on the propriety of awarding Michigan Mutual attorney's fees for the instant action is DENIED, so each party must bear its own fees and costs for this litigation.

FACTUAL BACKGROUND

The facts relevant to this motion are as follows. Defendant Wayne Smoot ("Smoot") was an employee of Henry's Wrecker Service Company ("Wrecker Service"). Defendant Debbie Smoot is the Worker's wife (collectively "Smoots"). Plaintiff Michigan Mutual Insurance Company ("Michigan Mutual") is the Wrecker Service's workers' compensation insurance provider.

Smoot was injured in a motor vehicle accident on March 6, 1995 during the course of his employment. He applied for, and received, workers' compensation in the amount of $162,587.57 from Michigan Mutual. Smoot and his wife subsequently sued the other driver involved in the accident in federal court. Michigan Mutual notified the Smoots that Michigan Mutual asserted a "lien" in the amount of the workers' compensation award. However, Michigan Mutual did not intervene or assert any of its rights in the third-party action. Without Michigan Mutual's knowledge or consent, the parties settled the third-party action on June 22, 1998 for $500,000.00. The third party's insurer issued a check payable to the Smoots and their attorneys. The Smoots' attorneys deducted the attorneys' fees and costs from the settlement and disbursed the remainder. The Smoots received $326,672.49 from the civil recovery. Michigan Mutual asked the Smoot to reimburse Michigan Mutual the amount of the workers' compensation benefits. Smoot and his wife have refused Michigan Mutual's requests.

Michigan Mutual filed a petition with the Virginia Workers' Compensation Commission to terminate Smoot's compensation benefits, and sought a ruling to compel Smoot to reimburse Michigan Mutual for compensation paid to Smoot. The Commission terminated Smoot's future benefits because Smoot had settled his tort action without Michigan Mutual's consent. The Commission ruled that it did not have authority to order the Worker to reimburse Michigan Mutual the compensation benefits.

Michigan Mutual brought suit against Smoot and his wife for reimbursement. The claim remaining before this Court alleges unjust enrichment. The Smoots and Michigan Mutual have filed cross motions for summary judgment on the claim.

DISCUSSION

Standard of Review

Under Rule 56(c) of the Federal Rules of Civil Procedure, the Court must grant summary judgment if the moving party demonstrates that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c). In reviewing a motion for summary judgment, the Court views the facts in a light most favorable to the non-moving party. Once a motion for summary judgment is properly made and supported, the opposing party has the burden of showing that a genuine dispute exists. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

Analysis

In filing cross motions for summary judgments, Michigan Mutual and the Smoots express agreement that there is no genuine issue of material fact in dispute. However, review of the facts as set forth by both parties demonstrates that there are factual disputes for a factfinder to resolve. The Court is able to decide some of the issues raised by the parties as a matter of law, but must leave the remaining issues for the trier of fact.

The Court grants Defendants' motion for summary judgment as to Defendant Debbie Smoot. The Court holds that, on the facts of this case, a factfinder could not find that Debbie Smoot was unjustly enriched for having received a tort award for loss of consortium from the civil action that the Smoots settled. This Court in its December 22, 2000 Memorandum Opinion in this case held that Michigan Mutual had pled a claim of unjust enrichment because a worker is not entitled to a double recovery under Virginia law: one recovery in workers' compensation benefits, and another in a third-party tort award. See, e.g., Tomlin v. Vance Int'l, Inc., 22 Va. App. 448, 470 S.E.2d 599, 601 (1996); Wood v. Caudle-Hyatt, Inc., 18 Va.App. 391, 444 S.E.2d 3, 8 (1994). Debbie Smoot has not received a double recovery because she has only recovered once. Only Defendant Wayne Smoot, as an employee, was entitled to and received a workers' compensation award from Michigan Mutual. Therefore, Debbie Smoot cannot be liable to reimburse Michigan Mutual for money that Michigan Mutual did not give her.

The Court also grants the...