O'Neal v. Kennamer

• Decision Date: 20 April 1992
• Docket Number: No. 91-7550,91-7550
• Parties: Kevin Daryl O'NEAL, Plaintiff-Counterclaim-Defendant, Appellee, Liberty Mutual Insurance Company, and Clopay Corporation, Intervenors-Appellants, v. Joe Martin KENNAMER, Defendant-Cross-Claim-Defendant, W.S. Newell, Inc., Defendant-Cross-Claim Plaintiff-Appellee, Prince Trucking, a partnership, Defendant-Counterclaim-Plaintiff-Cross-Claim Defendant, Associates Insurance Company, Defendant, v. LEND LEASE TRUCKS, INC., Counterclaim-Defendant.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1044

958 F.2d 1044

22 Fed.R.Serv.3d 1221

Kevin Daryl O'NEAL, Plaintiff-Counterclaim-Defendant, Appellee, Liberty Mutual Insurance Company, and Clopay Corporation, Intervenors-Appellants, v. Joe Martin KENNAMER, Defendant-Cross-Claim-Defendant, W.S. Newell, Inc., Defendant-Cross-Claim Plaintiff-Appellee, Prince Trucking, a partnership, Defendant-Counterclaim-Plaintiff-Cross-Claim Defendant, Associates Insurance Company, Defendant, v. LEND LEASE TRUCKS, INC., Counterclaim-Defendant.

No. 91-7550.

United States Court of Appeals Eleventh Circuit.

April 20, 1992.

Harold F. Herring, H. Carey Walker, III, Sadler, Sullivan, Herring & Sharp, Huntsville, Ala., for Liberty Mut. Ins. Co., and Clopay Corp.

R. Ben Hogan, III, Richard D. Stratton, Hogan, Smith, Alspaugh, Samples & Pratt, Birmingham, Ala., for Kevin Daryl O'Neal.

James E. Davis, Jr., Lanier, Ford, Shaver & Payne, P.C., Huntsville, Ala., for W.S. Newell, Inc.

Appeal from the United States District Court for the Northern District of Alabama.

Before KRAVITCH, Circuit Judge, GODBOLD and JOHNSON ^*, Senior Circuit Judges.

GODBOLD, Senior Circuit Judge:

This appeal concerns a conflict of laws question with respect to subrogation rights of the intervenors, Liberty Mutual and Clopay. It also raises the propriety of the district court's denial of a Rule 59(e) motion to alter or amend the judgment, which motion raised for the first time the contention that state law principles under which the matter was litigated and decided had been preempted by federal law.

Kevin O'Neal, a resident of Tennessee who worked for Clopay, a Tennessee employer, was injured in a truck collision in Alabama. He received disability and medical benefits through his employer as required by Tennessee worker compensation laws. O'Neal sued Prince Trucking and W.S. Newell for his injuries in an Alabama federal court with diversity jurisdiction. Clopay and Liberty Mutual, Clopay's workers' compensation program administrator, ¹ intervened in this suit.

O'Neal settled his suit in April 1991. After settlement the court set about to determine the intervenors' rights to subrogation. Liberty Mutual and Clopay filed a motion setting out the amounts O'Neal had received as compensation and as medical benefits and moved the court to award to them subrogation rights according to provisions of the Tennessee workers' compensation law. Under that law they would be subrogated for both compensation payments and medical benefits. They alleged that O'Neal was a resident of Tennessee, that his place of employment was Tennessee, that his contract of employment was entered into in Tennessee and that the terms of the Tennessee workers' compensation Act were part of his contract, and that the Act covered injuries arising outside of Tennessee as well as those arising within Tennessee. The movants supported their joint motion with affidavits, citations, and a 62 page copy of the entire chapter of the Tennessee Code on workers' compensation.

Defendant Newell responded with a motion for partial summary judgment and a supporting brief asserting that under Alabama law the lex loci delicti would control, and, applying Alabama law, Liberty Mutual and Clopay were entitled to recover compensation payments but not medical benefits paid. Prince followed with a similar motion for partial summary judgment, attaching some 41 pages of answers to interrogatories, medical reports, correspondence, and other data.

Liberty Mutual and Clopay then filed a motion in opposition to Newell's partial summary judgment motion, supported by a ten page brief contending that Tennessee law covered, not Alabama law. Still later they filed an amendment to this motion, placing before the court a copy of Clopay's Employee Benefit Plan, some 122 pages in length.

The district court held that Alabama law was controlling, with the result that Liberty Mutual and Clopay were subrogated to the amount of compensation paid but not to medical benefits. Judgment was entered on May 9.

I. The judgment

A federal court in a diversity case is required to apply the laws, including principles of conflict of laws, of the state in which the federal court sits. Goodwin v. George Fischer Foundry Systems, Inc., 769 F.2d 708 (11th Cir.1985). The first step in determining whose law is to govern in a conflict situation is the characterization of what kind of case is involved. The law of the forum controls this. Alabama has defined cases like this as tort cases. This is not a suit for workers' compensation. An action against a third-party tortfeasor (or against a co-employee, where not forbidden by the workers' compensation act) is a tort action for damages. Johnson v. Asphalt Hot Mix, 565 So.2d 219 (Ala.1990); Metropolitan Casualty Ins. Co. v. Sloss-Sheffield Steel & Iron Co., 241 Ala. 545, 3 So.2d 306 (1941). The right to which a subrogee is subrogated is "the right of action arising in favor of the injured workmen ... as a proximate consequence of the negligence or wrongful act of [a] third person." Id. 3 So.2d at 308. ²

We turn then to Alabama's conflict of laws rules that govern choice of law in tort cases. The district court held that the substantive rights of an injured party in a tort case are determined according to the law of the state in which the accident occurred. Fitts v. Minnesota Mining & Mfg. Co., 581 So.2d 819, 820 (Ala.1991). If an injured employee recovers damages from a third party, the employer can seek reimbursement for compensation paid to the employee pursuant to workers compensation laws. Ala.Code § 25-5-11(a). In Alabama "compensation" does not include medical benefits. Liberty Mutual Ins. Co. v. Manasco, 271 Ala. 124, 123 So.2d 527, 530 (1960).

In Northeast Utilities, Inc. v. Pittman Trucking Co., 595 So.2d 1351 (Ala.1992) the Alabama Supreme Court addressed the issue before us--in a third party action brought in Alabama by a plaintiff who is workers' compensation insured in another state, are the rights to proceeds received by the plaintiff determined by the workers' compensation law of Alabama, the lex loci, of the state whose law the plaintiff invoked to obtain workers' compensation benefits? The court held that Alabama law applied to the rights to the proceeds.

Appellants seek to avoid the above analysis at the first step by characterizing the dispute between the intervenors and O'Neal not as a tort case but as a contract case arising from an agreement implied by law between employer and employee. As they spell it out, claims for workmen's compensation are based upon an implied agreement between employee and employer, and that agreement is in the nature of a quid pro quo for which the employee gives up a potentially higher recovery based on tort and receives a high degree of certainty in the receipt of benefits, and the employer gives up tort-based defenses in exchange for benefits that are certain but limited. This, intervenors say, is an implied provision of O'Neal's Tennessee agreement. The difficulty with this is that the decision of what kind of case is involved is governed by Alabama law, and Alabama characterizes this as a tort case, which under Alabama conflicts of laws rules requires application of the lex loci, and, as Northeast Utilities holds, these same principles apply to a determination of the right to proceeds of a third party suit brought in Alabama by the employee. The district court did not err in following Alabama law and denying subrogation to medical benefits and in declining to follow Tennessee law.

II. The motion to amend or vacate the judgment

Liberty Mutual and Clopay, having litigated and lost on the theory that Tennessee law applied, timely filed a Rule 59(e) motion to alter, amend or vacate the judgment and to award them subrogation to all benefits. They asserted for the first time that neither Tennessee nor Alabama law applied because the employee benefits provided by Clopay to O'Neal constituted an "employee welfare benefit plan" under 29 U.S.C. § 1001, et seq., the Employee Retirement Income Security Act. This Act, they said, supersedes all state laws that relate to an employee welfare benefit plan, including state statutes, regulations, rules and court decisions, and any other state action having the effect of law. Consequently, they contended that the provisions of the Clopay plan itself controlled and that it provided for a right to subrogation for all benefits paid. On June 11, 1991 the court denied the Rule 59(e) motion.

The district court did not commit error in denying the Rule 59(e) motion. The decision to alter or amend a judgment is committed to the sound discretion of the district court. This court will not overturn a denial of a Rule 59 motion absent abuse of discretion. American Home Assur. Co. v. Glenn Estess & Associates, Inc., 763 F.2d 1237, 1238-39 (11th Cir.1985). Motions to amend should not be used to raise arguments which could, and should, have been made before the judgment was issued. Lussier v. Dugger, 904 F.2d 661, 667 (11th Cir.1990). Denial of a motion to amend is "especially soundly exercised when the party has failed to articulate any reason for the failure to raise the issue at an earlier stage in the litigation." Id.

We have described above the efforts made by intervenors to establish their right to recoup medical benefits they had paid by asserting the primacy of the Tennessee law to the exclusion of Alabama law. Nowhere, until after judgment, did intervenors even whisper that ERISA might govern this case. For several reasons the district court did not abuse its discretion in denying intervenors' effort to obtain a second bite at the apple. The intervenors did not then, and do not now, explain why they failed to raise before judgment the preemption argument they now assert. ³ Nor do they explain why the district court's denial of their motion was an abuse of discretion.

Moreover, there are many bridges to be crossed, factual and legal, before a determination...