Southerland v. Irons

• Decision Date: 29 August 1980
• Docket Number: No. 78-1147,78-1147
• Citation: Southerland v. Irons, 628 F.2d 978 (6th Cir. 1980)
• Parties: Sandra Lou SOUTHERLAND et al., Plaintiffs, v. Frank IRONS et al., Defendants, Richard L. Wolk, Appellant, Michigan Department of Social Services, Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 978

628 F.2d 978

Sandra Lou SOUTHERLAND et al., Plaintiffs, v. Frank IRONS et al., Defendants Richard L. Wolk, Appellant Michigan Department of Social Services, Appellee.

No. 78-1147.

United States Court of Appeals Sixth Circuit.

Argued April 15, 1980.

Decided Aug. 29, 1980.

Jacob K. Stein, Paxton & Seasongood, Donald J. Mooney, Jr., Cincinnati, Ohio, for appellant.

Frank J. Kelley, Atty. Gen., Robert N. Rosenberg, Asst. Atty. Gen., Robert A. Derengoski, Sol. Gen., Janis Meija, Asst. Atty. Gen., Lansing, Mich., for appellee.

Before KEITH and MERRITT, Circuit Judges, and PHILLIPS, Senior Circuit Judge.

PER CURIAM.

Attorney Richard L. Wolk appeals from the finding by District Judge Robert E. DeMascio that Wolk perpetrated a fraud on the court. Reference is made to the published opinion of the district court for a comprehensive statement of the facts. Southerland v. County of Oakland, 77 F.R.D. 727 (E.D.Mich.1978). We affirm.

Wolk filed the underlying civil rights action in 1973 on behalf of the plaintiff, Sandra Lou Southerland. Mrs. Southerland's cause of action arose from a confrontation between her husband and Oakland County, Michigan, Sheriff's Deputies which left her husband permanently incapacitated and hospitalized. Wolk undertook the case for a 50 percent contingent fee.

While the case was awaiting trial, most of Mr. Southerland's medical expenses were paid by appellee Michigan Department of Social Services (MDSS) through the state Medicaid program. Although designed for indigent persons, M.C.L. § 400.105, potentially solvent individuals may receive Medicaid assistance until they become solvent. M.C.L. § 400.107. In such cases, however, MDSS is subrogated to the recipient's right of recovery to the extent of funds expended for the recipient's medical care. M.C.L. § 400.106(2)(b). Therefore, MDSS became subrogated to Mrs. Southerland's right of recovery against the defendants to the extent of some $30,000 it had paid toward her husband's care.

MDSS notified appellant Wolk of its claim. Believing Wolk had agreed to represent its interest, MDSS elected not to intervene in the suit. This proved to be a mistake.

The case came on for trial before Judge DeMascio and a jury in August of 1974. On the second day of trial, however, one of the jurors announced that, due to the nature and extent of Mr. Southerland's injuries, she no longer could serve fairly as a juror on the case. On the defendants' motion, Judge DeMascio declared a mistrial.

Immediately thereafter, the parties conducted in-chambers settlement negotiations that culminated in a $500,000 settlement agreement. The parties returned to the courtroom and read the settlement's terms into the record. Judge DeMascio raised the question of the MDSS lien and the plaintiff's litigation expenses. Attorney Wolk responded that he would pay both from his 50 percent contingent fee, and assured the court Mrs. Southerland would net $250,000 from the settlement. Accordingly, the court approved the settlement, but left allocation of damages to the parties. As finally entered, the settlement agreement allocated $15,000 to each of Mrs. Southerland's two children, $1000 to Mr. Southerland, whom the parties erroneously supposed would continue to be eligible for Medicaid assistance, and the balance to Mrs. Southerland individually.

On October 21, 1976, MDS filed what it styled a Rule 60(b) motion for relief from judgment on the ground judicial approval of the settlement agreement had been procured by fraud. Specifically, MDSS alleged Wolk had not performed and had never intended to perform his promise to the court to pay the MDSS lien. Wolk responded that MDSS had no standing as a non-party to raise the issue and denied he had committed any fraud.

In November of 1976, Judge DeMascio heard arguments on the standing issue and set December 13, 1976 for evidentiary hearings on the allegations of fraud. On December 2, however, Wolk filed a motion to disqualify Judge DeMascio. On April 8, 1977, Judge DeMascio filed his memorandum opinion setting forth his reasons for declining to disqualify himself and holding MDSS had standing to raise the fraud issue. Evidentiary hearings thus were delayed until April 25 and 26 and June 6, 1977.

At the evidentiary hearing, Judge DeMascio heard conflicting testimony as to the events following the entry of judgment on the settlement agreement. MDSS presented evidence that Wolk had procured the exclusion of MDSS from the list of payees on the settlement check. Further, while Wolk originally had represented to the court that Medicaid benefits made it unnecessary to allocate more than $1000 of the settlement to Mr. Southerland, he later had attempted to persuade MDSS the court had approved this figure as the maximum MDSS could recover on its lien. Even the $1000 Wolk was prepared to offer had been allocated from Mrs. Southerland's half of the settlement proceeds, not the one-half claimed by Wolk. Finally, Mrs. Southerland testified she had paid a $225 expert witness fee, $1200 in court costs, and all her husband's medical expenses since the time of trial.

Wolk testified the defendants' attorney had suggested the $1000 allocation as a means of settling with MDSS, and Wolk had attempted in good faith but without success to settle with MDSS. Wolk said he still was prepared to pay any part of the MDSS claim that exceeded $1000; however, Mrs. Southerland had several possible defenses to the claim which Wolk would assert if MDSS...