Summerford v. Covenant Transp., No. 7:04CV5004.

• Decision Date: 23 May 2005
• Docket Number: No. 7:04CV5004.
• Citation: 370 F.Supp.2d 934
• Parties: Howard SUMMERFORD, Plaintiff, v. COVENANT TRANSPORTATION, and John-David A. Lands, Defendants, and B.D.R. Transport, Inc., a Vermont Corporation, and Commerce and Industry Insurance Company, a subsidiary of American International Group, a New York Insurance Corporation Intervenors.
• Court: U.S. District Court — District of Nebraska

370 F.Supp.2d 934

Howard SUMMERFORD, Plaintiff, v. COVENANT TRANSPORTATION, and John-David A. Lands, Defendants, and B.D.R. Transport, Inc., a Vermont Corporation, and Commerce and Industry Insurance Company, a subsidiary of American International Group, a New York Insurance Corporation Intervenors.

No. 7:04CV5004.

United States District Court, D. Nebraska.

May 23, 2005.

Jonathan S. Frizzell, Waystack, King Law Firm, Colebrook, NH, Maren L. Chaloupka, Robert P. Chaloupka, Chaloupka, Holyoke Law Firm, Scottsbluff, NE, for Plaintiff.

Robert F. Bartle, Bartle, Geier Law Firm, Thomas R. Lamb, Anderson, Creager

Law Firm, Lincoln, NE, for Defendants.

MEMORANDUM AND ORDER

PIESTER, United States Magistrate Judge.

Pending before me are several motions related to the distribution of the proceeds of the settlement reached between the plaintiff and defendants. The remaining dispute in this case is between the plaintiff and the intervening parties. The intervenor asserts a subrogation interest in the settlement proceeds and moves for distribution under Vermont statute, 21 V.S.A. § 624, (filing 43); the plaintiff moves for an equitable distribution of settlement proceeds pursuant to Neb. Rev. Stat 48-118, (filing 35). Both parties have submitted evidence on these motions. The plaintiff has moved to strike portions of the intervenors' evidence, (filing 50), and has moved to submit additional surrebuttal evidence. (Filing 55).

The plaintiff's motion to submit surrebuttal evidence will be granted and the supplemental affidavit of Maren Chaloupka dated March 28, 2005 has been considered herein. The plaintiff's motion to strike challenges both the substance and admissibility of the filing 44 affidavit of Robert Allen. The court will not strike an affidavit merely because it contains facts contrary to the plaintiff's version of the events. As to the disputes of fact and the admissibility issues raised by plaintiff's motion to strike and the evidence offered in support of the parties' cross-motions for distribution, the following statement of facts relies on only those portions of the affidavits and attachments that are both admissible and undisputed.

On November 16, 2002, the plaintiff, Howard Summerford, while working as a truck driver for B.D.R. Transport Inc., was injured in a motor vehicle accident. At the time of the accident, Summerford was located in the sleeper cab of the BDR truck. The truck was experiencing engine problems and was parked on the shoulder of Interstate 80 near Paxton, Keith County, Nebraska. The accident occurred when a Covenant Transportation, Inc. truck swerved onto the shoulder of the road and hit the parked BDR truck.

Summerford is a resident of New Hampshire. BDR is a Vermont corporation. Within four days after the accident, BDR presented Summerford with documents to file for workers' compensation benefits under Vermont law. Summerford completed those documents and began receiving workers' compensation benefits shortly thereafter.

On May 20, 2003, Summerford retained Mr. Jonathan Frizzell, an attorney from New Hampshire, to pursue a third-party claim against Covenant Transportation, Inc. and its driver, John-David Lands, (collectively referred to herein as "Covenant"). By the time Mr. Frizzell was retained, Summerford had already received workers' compensation benefits for approximately six months, and he continued to receive such benefits during his litigation against Covenant. As to all of workers' compensation amounts paid by B.D.R. Transport Inc. and its workers' compensation insurer, Commerce and Industry Insurance Company (collectively referred to herein as "BDR"), Summerford's right to receive and the amount of compensation benefits owed was determined under Vermont workers' compensation law. Filing 49, attachment 3, Frizzell affidavit and exhibits thereto; filing 52, Summerford affidavit. As of February 24, 2005, BDR had paid a total of $143,052.21 in workers' compensation benefits. Filing 44, (Allen affidavit) attachment 9; filing 56, (Chaloupka affidavit), ¶ 3.

Summerford filed suit in this court against Covenant claiming negligence and a right to recover common law damages under Nebraska tort law. BDR was not a party to the action either at the time of filing suit or the time of the settlement of the claim between Covenant and Summerford.

Though the parties disagree as to the cooperative effort provided by BDR's counsel during the course of the Summerford/Covenant litigation, the record reflects that during the course of the litigation, BDR's counsel and plaintiff's counsel "kept each other up to date in a rather professional, reasonable, and responsible manner." Filing 49, (Chaloupka affidavit), ex. 4. BDR provided access to documentation as requested concerning the medical care and expenses related to Summerford's workers' compensation claim, along with updated workers' compensation lien amounts, to assist Summerford's counsel in litigating the claim against Covenant.¹ Filing 38, ex. 1 (Chaloupka affidavit), exs. G-O. BDR's counsel did not, however, conduct or attend depositions to pursue the case against Covenant. See filing 38, exhibits 2-4; filing 49 (Chaloupka affidavit), exs. 1-4.

The suit between Summerford and Covenant was successfully mediated on November 12, 2004, with Covenant agreeing to pay Summerford $225,000.00 for all plaintiff's economic and noneconomic damages arising from the November 16, 2002 truck accident. Filing 38, ex. 1 (Chaloupka affidavit) ex. A. Plaintiffs' counsel had advised BDR of the scheduled mediation, but BDR did not attend. Filing 38, ex. 1 (Chaloupka affidavit) ex. F; filing 49, (Chaloupka affidavit), exs. 4 & 5.

Of the $225,000 settlement paid by Covenant, Summerford's counsel retained $90,000.00 (or 40%) pursuant to their contingency fee agreement with the plaintiff, and $14,328.20 for costs incurred for the litigation. $2,671.80 was distributed to the plaintiff, and the remainder ($118,000.00) is held in trust pending a determination of BDR's right to subrogation for amounts paid as workers' compensation. Filing 38, ex. 1 (Chaloupka affidavit), exs. B-D. BDR's workers compensation lien as of the time of mediation was $118,000. Filing 56, (Chaloupka affidavit), ¶ 3.

BDR was not a party to the contingency fee contract between Summerford and his counsel, and BDR never agreed to pay plaintiff's counsel a 40% contingency fee on any recovery from Covenant. Filing 38, ex. 1 (Chaloupka affidavit), ex. P.; filing 49, (Chaloupka affidavit), ¶ 3. Prior to the mediation, Summerford's counsel, Mr. Frizzell, confirmed that BDR was seeking to recover two-thirds of its gross lien amount. Filing 44, (Allen affidavit), ¶ 7. However, at the time of the mediation, plaintiff's counsel claimed Nebraska law, not Vermont law, applied to BDR's subrogation claim and under Nebraska law BDR may have a lien but, since Summerford was not "made whole" by the settlement ultimately reached with Covenant, BDR was not entitled to recover on that lien. Filing 38, ex. 1 (Chaloupka affidavit), ex. E; filing 49, (Chaloupka affidavit), ex. 8.

The dispute now before the court is whether, and to what extent, BDR is entitled to assert a right of subrogation against the settlement proceeds owed to Summerford by Covenant. With regard to this dispute, the parties' motions and briefs raise the issue of whether Vermont or Nebraska law applies to BDR's subrogation claim. BDR argues it is entitled to "dollar-for-dollar" recovery under Vermont law. Summerford demands an equitable distribution under Nebraska law and, relying on Blue Cross/Blue Shield v. Dailey, 268 Neb. 733, 687 N.W.2d 689 (2004) and Jensen v. Board of Regents, 268 Neb. 512, 684 N.W.2d 537 (2004), argues that since he was not "made whole" by the $225,000 settlement with Covenant, the value of BDR's equitable interest is zero.

A federal district court sitting in Nebraska must follow Nebraska's conflict of laws rules in determining which state's law applies. F.D.I.C. v. Nordbrock, 102 F.3d 335, 337 (8th Cir.1996)(citing Modern Computer Systems, Inc. v. Modern Banking Systems, Inc., 858 F.2d 1339, 1342 (8th Cir.1988)). The Nebraska Supreme court, in Turney v. Werner Enterprises, Inc., 260 Neb. 440, 445, 618 N.W.2d 437, 440 (2000) held that an employer's or insurer's subrogation interest in an injured employee's recovery from a third party is determined by the law of the state in which the employee obtained workers' compensation benefits. Id. (citing a Vermont case, LaBombard v. Peck Lumber Co., 141 Vt. 619, 451 A.2d 1093 (1982), and Van Den Heuval v. Wallace, 382 Pa.Super. 242, 555 A.2d 162 (1989); Perry v. Carter, 620 S.W.2d 50 (Mo.App.1981); 9 Arthur Larson & Lex K. Larson, Larson's Workers' Compensation Law § 144 (1999)).

Summerford received his workers' compensation benefits from BDR under Vermont law. The plaintiff's brief argues that he could have sought workers compensation recovery under Nebraska law since his accident occurred in this state. The plaintiff appears to be claiming that he never actually chose to receive benefits under Vermont law. The clear implication of the argument is that BDR was obligated at the outset to inform Summerford of his right to elect workers compensation benefits under Nebraska law and, having failed to do so, BDR is estopped from relying on Vermont law to obtain recovery on its subrogation claim. The plaintiff has not cited and I have found no law to support that argument. Moreover, there are no facts to support a claim that at the time the decision was made, had Summerford been fully informed of the option, he would have elected to recover under Nebraska's workers' compensation statutory scheme instead of Vermont's. Each state's laws vary, and there is no evidence comparing the actual benefits afforded Summerford under Vermont law to those he could have received under Nebraska law.

The facts of this case do not implicate Nebraska public policy in such a manner as to...