Takahashi v. Loomis Armored Car Service

Decision Date13 August 1980
Docket NumberNo. 78-1584,78-1584
Citation625 F.2d 314
PartiesFaythe S. TAKAHASHI and Hideo H. Takahashi, Plaintiffs-Appellees, v. LOOMIS ARMORED CAR SERVICE, Defendant, and Liberty Mutual Insurance Company, Defendant-Appellant.
CourtU.S. Court of Appeals — Ninth Circuit

Evelyn B. Lance, Honolulu, Hawaii, argued for defendant-appellant.

Samuel E. Meredith, San Francisco, Cal., on brief, for defendant-appellant and argued for plaintiffs-appellees.

Paul F. Cronin, Cronin, Fried, Sekiya, Haley & Kekina, Honolulu, Hawaii, on brief, for plaintiffs-appellees.

Appeal from the United States District Court for the District of Hawaii.

Before CHAMBERS and PREGERSON, Circuit Judges, and BILBY, * District Judge.

PREGERSON, Circuit Judge:

This is an appeal from the district court's allocation of attorney's fees between an injured employee, Faythe S. Takahashi, and her employer's compensation carrier, Liberty Mutual Insurance Co., in connection with the settlement of a third party action under Hawaii Revised Statute (HRS) § 386-8. The carrier contends that the district court improperly calculated the employer's proportionate share of attorney's fees. We affirm.

For job-related injuries, Mrs. Takahashi received a workers' compensation award of $40,906.93, to be paid over an extended period of time. She then commenced and settled a third party action, under HRS § 386-8, against Loomis Armored Car Service.

HRS § 386-8 provides that if a job-related injury gives rise to tort liability in a party other than the employer or a fellow employee, the injured employee, receiving workers' compensation benefits, may bring an action against that third party. Under the statute, if the injured employee prevails in the third party action, the employer, or the employer's compensation insurance carrier, must be reimbursed for any benefits paid under a workers' compensation award. Mrs. Takahashi settled her third party claim against Loomis Armored Car Service for $85,000. 1 From the proceeds of that settlement, appellant, the employer's insurance carrier, was reimbursed for the $13,662.87 in workers' compensation payments it had already made to Mrs. Takahashi before the settlement. The settlement also relieved the carrier of liability for any further payments under the $40,906.93 workers' compensation award.

Under § 386-8, when an employee, such as Mrs. Takahashi, prosecutes a third party action, she is entitled to deduct from the employer's share of the benefits recovered a reasonable attorney's fee, based on the "services rendered by the employee's attorney in effecting recovery both for the benefit of the employee and the employer." 2 In this case, the district court ruled that, for purposes of § 386-8, the "benefit" rendered to the employer by settlement of the third party action was reimbursement for amounts already paid under the workers' compensation award, plus relief from having to make any further payments under that award. In other words, the district court found that the benefit to the employer was $40,906.93, the full amount of its liability under the workers' compensation award. Since the parties had fixed the attorney's fees at one-third of the $85,000 settlement figure, the court determined that the employer's proportionate share of these fees would be one-third of the total workers' compensation award of $40,906.93, or $13,635.64.

Appellant contends that the employer's share of the attorney's fees should be limited to an amount proportionate to the payments it had actually made to Mrs. Takahashi before the third party settlement, i. e., one-third of $13,662.87, rather than one-third of the total workers' compensation award of $40,906.93. Appellee argues that since, in addition to reimbursement for payments already made, the employer also benefitted from the settlement by being relieved of its liability to make further payments under the workers' compensation award, the employer's share of the attorney's fees should be based on the total benefit the employer received.

In this diversity action, the court must apply the substantive law of the forum state, Hawaii. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938). In the absence of controlling forum state law, a federal court sitting in diversity must use its own best judgment in predicting how the state's highest court would decide the case. See Amfac Mortgage Corp. v. Arizona Mall of Tempe, Inc., 583 F.2d 426, 434-435 (9th Cir. 1978); Robinson v. United States, 518 F.2d 1105, 1108 (9th Cir. 1975). In so doing, a federal court may be aided by looking to well-reasoned decisions from other jurisdictions. See C. Wright, Law of Federal Courts 271 n. 32 (3d ed. 1976); 1A-Moore's Federal Practice P 0.309(2) (2d ed. 1979).

We will defer to the district court's construction of the law of the state in which the district court sits. Holcomb Construction Co. v. Armstrong, 590 F.2d 811, 813 (9th Cir. 1979); American Timber and Trading Co. v. First National Bank of Oregon, 511 F.2d 980, 983 (9th Cir. 1973), cert. denied, 421 U.S. 921, 95 S.Ct. 1588, 43 L.Ed.2d 789 (1975). The district court's determination, particularly where there has been no clear state court exposition of a controlling principle, will be accepted on review unless shown to be "clearly wrong." Gee v. Tenneco, Inc., 615 F.2d 857, 861 (9th Cir. 1980); American Timber and Trading Co. v. First National Bank of Oregon, 511 F.2d at 983.

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