South Down Liquors, Inc. v. Hayes

• Decision Date: 05 October 1989
• Parties: SOUTH DOWN LIQUORS, INC. v. Roy D. HAYES, Jr. 178 Sept. Term 1989.
• Court: Court of Special Appeals of Maryland

Page 464

80 Md.App. 464

564 A.2d 119

SOUTH DOWN LIQUORS, INC. v. Roy D. HAYES, Jr.

178 Sept. Term 1989.

Court of Special Appeals of Maryland.

Oct. 5, 1989.

T. Michael Preston (Anderson, Coe & King, on brief), Baltimore, for appellant.

H. Robert Scherr (Scherr, Cole & Murphy, on brief), Pikesville, for appellee.

Submitted before WILNER and ROSALYN B. BELL, JJ., and JAMES S. GETTY, Associate Judge of the Court of Special Appeals (retired, specially assigned).

WILNER, Judge.

This appeal presents a single narrow question: where an employer/insurer has paid workers' compensation benefits to an injured employee and the employee, pursuant to Md.Ann.Code art. 101, § 58, thereafter sues the party who caused the injury, can that third party compel the employer/insurer to join the action as a co-plaintiff on the ground that the employer/insurer is a "real party in interest"? Our answer is "no."

The facts here are simple and undisputed. Roy Hayes, appellee, was employed as a delivery man by Chesapeake Bay Distributing Company. While in the course of delivering beer to one of Chesapeake's customers, South Down Liquors, Inc., Hayes was injured when a piece of equipment he was using fell into a hole in the floor of South Down's storage trailer. He filed a worker's compensation claim against Chesapeake and eventually was awarded compensation of $37,323. Hayes then filed this action against South Down in the Circuit Court for Anne Arundel County alleging negligence in allowing the hole in the floor to exist.

When, in response to interrogatories, Hayes disclosed the compensation award, South Down moved to have Chesapeake's compensation insurer, Selective Insurance Company joined as a party plaintiff. It urged that, as Selective had "a statutory lien against any recovery by the Plaintiff," it was a "real party in interest" and therefore was required to join as a co-plaintiff under Md. Rule 2-201. Hayes resisted that motion, arguing that any question of required joinder was governed by Md. Rule 2-211 and that joinder of Selective was not mandatory under that rule.

Agreeing that Rule 2-211 did not require that Selective be joined as a party, the court denied South Down's motion, whereupon this appeal was filed. ¹

The issue presented here requires an examination of the two Rules cited--Rules 2-201 and 2-211--and how they relate to, and are affected by, Md.Ann.Code art. 101, § 58. We shall begin with the statute.

Section 58 sets forth the respective rights of an injured employee and his employer where, as here, the employee suffers an injury that may entitle him to both worker's compensation benefits from his employer and damages from some third party who caused the injury. It begins by purporting to give the employee an initial option: he may sue the third party at law or he may seek compensation under the Act. ² If he seeks, and receives, an award of compensation, both he and his employer (or the employer's insurer, if the employer is insured) may then proceed against the third party.

For the first two months following passage of the Commission's award, the employer/insurer has the exclusive right to bring an action to "enforce for their benefit ... the liability of such other person." If, in such an action, damages are recovered in excess of the compensation paid, the excess, less the cost and expense of bringing the action, "shall be paid to the injured employee...." If the employer/insurer fails to bring such an action within the two-month period, the employee may sue the third party. If he does so and gets a recovery, the recovery goes, first, to reimburse him for the cost and expense of the action, second, to reimburse the employer/insurer for the compensation paid or awarded, and, last, to the employee.

With the gloss of case law, § 58, in effect, affords an employer/insurer three "rights" to proceed against the third party, and it affords the employee two such "rights." During the first two months following passage of the award, the employer/insurer has the sole, exclusive right to sue the third party; thereafter, it has a concurrent right with the employee to bring the action; and, during that period of concurrency, it has a right under Md. Rule 2-212 (Permissive Joinder of Parties) to intervene in any action brought initially by the employee. See Collins v. United Pacific Ins. Co., 315 Md. 141, 148 n. 5, 553 A.2d 707 (1989), and cases cited therein. The employee has no exclusive right comparable to that of the employer/insurer. He does, however, have the concurrent right to sue after the expiration of the two-month period and, if an action is brought by the employer/insurer, he would have the right under Rule 2-212 to intervene in it.

Rule 2-201 states, in relevant part:

"Every action shall be prosecuted in the name of the real party in interest, except that an executor, administrator, personal representative, guardian, bailee, trustee of an express trust, person with whom or in whose name a contract has been made for the benefit of another, receiver, trustee of a bankrupt, assignee for the benefit of creditors, or a person authorized by statute or rule may bring an action without joining the persons for whom the action is brought."

South Down's position is based on the first clause of Rule 2-201--the command that "[e]very action shall be prosecuted in the name of the real party in interest." Because of its statutory right of subrogation--its right to reimbursement from the proceeds of any award recovered from the third party--the employer/insurer is, under South Down's view, necessarily a real party in interest in an action brought by the employee. South Down observes that, in every circumstance contemplated by § 58 but this, the employer/insurer will be a named-plaintiff. Only where the employee, during the period of concurrency, brings the action in his own name is it possible for the employer/insurer not to be a plaintiff, and that gap, it insists, is filled by Rule 2-201.

Hayes, naturally, has a quite different view. He essentially ignores Rule 2-201 and looks only to Rule 2-211, dealing with the required joinder of parties. Under the criteria set forth in that Rule, he argues, Selective is not required to be joined as a plaintiff.

Rule 2-211 provides, in relevant part:

"Except as otherwise provided by law, a person who is subject to service of process shall be joined as a party in the action if in the person's absence (1) complete relief cannot be accorded among those already parties, or

(2) disposition of the action may impair or impede the person's ability to protect a claimed interest relating to the subject of the action or may leave persons already parties subject to a substantial risk of incurring multiple or inconsistent obligations by reason of the person's claimed interest."

None of these conditions, Hayes asserts, pertains here. Selective's right to reimbursement is fully protected by statute and is dischargeable only from whatever recovery may be obtained by Hayes. South Down will not--cannot--face another action by Selective, whatever may be the outcome of this case. Accordingly, the absence of Selective as a party will not (1) prevent complete relief from being accorded among those already parties, (2) impair or impede Selective's rights in any way, or (3) put South Down at risk of incurring multiple or inconsistent obligations.

The question of compulsory joinder of a subrogated employer/insurer has been presented to and discussed by the Court of Appeals in some earlier cases, but it does not appear to have been clearly and definitively resolved. The law elsewhere, particularly in Federal court interpretations of Fed.R.Civ.P. 17(a), is somewhat in conflict.

The issue was first considered by the Court of Appeals in Stark v. Gripp, 150 Md. 655, 133 A. 338 (1926). The plaintiff there was injured on the job in an automobile accident. He collected compensation from his employer and then sued, and recovered a judgment against, the third party causing the accident. The defendant appealed arguing, according to the Court, that "the right of the employer or insurer to reimbursement for compensation paid and incidental expenses, secured them by section 58 of the act, should, in a suit by the workman, be protected by having the suit instituted to their use, pro tanto, and the amount recovered apportioned in the verdict and judgment." Id. at 658, 133 A. 338. ³ The Court rejected the argument so framed by it, holding at 658-59, 133 A. 338:

"Even if that should be true, these appellants would have no interest to be protected by entering the suit so, or by having the judgment against them so apportioned, and they could not ask that the judgment be reversed for lack of these things. And the statute does not require them. Unlike the statute on death by negligence (Code, article 67), this statute contains no requirement as to the form or title of the suit, and requires no apportionment. It speaks of a suit to be brought and prosecuted by the injured workman to enforce the liability, and provides only that from damages recovered the employer or insurer shall be reimbursed. See Bethlehem Steel Co. v. Variety Co., 139 Md. 313, 326 . It may not be improper, in a suit under section 58, to entitle the case as contended for, and to have the jury make an apportionment of the amount in their verdict, but it is not necessary that it should be done."

(Emphasis added.)

The issue of involuntary joinder of an employer arose again, in a quite different context, in Baltimore Transit Co. v. State, 183 Md. 674, 39 A.2d 858 (1944). That action stemmed from a fatal injury suffered by an employee of Baltimore City when a truck in which he was riding was struck by a streetcar. The City, as a self-insured employer, paid compensation benefits to the decedent's dependents, who then sued the transit company and the owner and driver of the truck. The transit company filed a third party claim against the City,...