U.S. v. Trammel, 88-6241

• Decision Date: 12 June 1990
• Docket Number: No. 88-6241,88-6241
• Citation: 899 F.2d 1483
• Parties: UNITED STATES of America, Plaintiff-Appellant, v. Thomas TRAMMEL, Defendant-Appellee, Motorists Mutual Insurance Company, Defendant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1483

899 F.2d 1483

UNITED STATES of America, Plaintiff-Appellant, v. Thomas TRAMMEL, Defendant-Appellee Motorists Mutual Insurance Company, Defendant.

No. 88-6241.

United States Court of Appeals Sixth Circuit.

Argued Aug. 7, 1989.

Decided April 3, 1990.

Rehearing and Rehearing En Banc Denied June 12, 1990.

David Y. Olinger, Jr., Asst. U.S. Atty., Louis DeFalaise, U.S. Atty., Lexington, Ky., Freddi Lipstein, U.S. Dept. of Justice, Appellate Section, Joan E. Hartman (argued), U.S. Dept. of Justice, Civ. Div., Washington, D.C., for plaintiff-appellant.

Robert L. Milby, Hamm, Milby, & Ridings, London, Ky., Tim Lavender (argued), Whitley City, Ky., for defendant-appellee.

Before JONES and NORRIS, Circuit Judges, and McQUADE, District Judge. ^*

ALAN E. NORRIS, Circuit Judge.

The government appeals from an order of summary judgment denying its claim under the Federal Medical Care Recovery Act ("FMCRA"), 42 U.S.C. Secs. 2651-2653. The district court concluded that, under the facts of this case, the government's FMCRA rights are effectively abrogated by Kentucky's no-fault insurance statute. On appeal, we are asked to determine the extent to which the government's right under the federal statute is independent of the substantive law of the state on which it is predicated. For the reasons set out more fully below, we affirm.

I.

On July 13, 1983, a truck driven by defendant, Thomas Trammel, collided with a motorcycle driven by Johnny Troxell in McCreary County, Kentucky. The motorcycle slid under defendant's truck and Troxell sustained serious injuries requiring medical treatment. At the time of the accident, Troxell was on active duty in the United States Navy. The federal government, therefore, provided Troxell with free medical care pursuant to 10 U.S.C. Sec. 1074 ¹ and incurred expenses amounting to $5,215.

Under Kentucky's modified no-fault statute, all drivers are deemed to have accepted the state's no-fault provisions including an "abolition" ² of tort liability for the first $10,000 of economic loss, which are covered by the basic reparation benefits provision of the statute. ³ Accordingly, Troxell was precluded from recovering the first $10,000 of his loss ⁴ because he did not reject the limitation on his tort rights as provided in Ky.Rev.Stat.Ann. Sec. 304.39-060(4) (Baldwin 1988). ⁵ Kentucky's no-fault statute, however, does not affect an injured party's right to recover "for pain, suffering, mental anguish and inconvenience because of bodily injury, sickness or disease" provided that certain statutory thresholds are met. ⁶

The government subsequently filed an action against Trammel and his insurer, Motorists Mutual Insurance Company, in the United States District Court for the Eastern District of Kentucky, seeking to recover the amount spent on Troxell's medical care. ⁷ The government's claim was based upon the FMCRA, which provides that when the government is required by law to furnish medical treatment, it may recover the reasonable value of such treatment if state law imposes tort liability upon a third-party tortfeasor. 42 U.S.C. Sec. 2651. The district court granted defendant's motion for summary judgment, reasoning that since Kentucky's no-fault statute eliminated tort liability for the first $10,000 of medical expenses, there was no tort claim to which the government could be subrogated under the FMCRA.

On appeal, the government contends that the district court misinterpreted the FMCRA, improperly denied its FMCRA claim, and adopted a holding contrary to Congress' stated purpose.

II.

Recognizing the need to maintain high morale in the uniformed services, Congress has chosen to provide this vast group of persons with medical care at the expense of the federal government. ⁸ This laudable goal would be expensive under any circumstances. It has proven to be an especially onerous financial burden because Congress has decided to pay for medical care furnished at either government or private facilities. Since many of the injuries sustained by servicemen are the result of third-party negligence, the government has, quite naturally, desired to recover its expenses from negligent parties.

Absent specific federal legislation, however, the Supreme Court has not permitted the government a right of recovery, refusing to create an additional category of federal tort liability and refusing to extend by analogy the common law's protection against loss of services and "assimilated injuries" that the common law affords to various relationships. ⁹ Prior to the enactment of the FMCRA, in United States v. Standard Oil Co., 332 U.S. 301, 67 S.Ct. 1604, 91 L.Ed. 2067 (1947), the government argued that it was entitled to recover its expenditures because the negligence of third parties tortiously interfered with the relationship between the government and its employees. The Supreme Court rejected this argument, reasoning that federal law is the sole basis for interpreting the legal relationship between servicemen and the government and no federal law existed to sustain such a claim. Id. at 305-314, 67 S.Ct. at 1606-1611. In addition, the Court was reluctant to involve itself in matters of military and fiscal policy. Id. at 314-16, 67 S.Ct. at 1611-12. The Court noted, however, that Congress was free to "take steps to prevent interference with federal funds, property or relations." Id. at 315, 67 S.Ct. at 1611.

Congress passed the FMCRA in 1962 as a belated response to the Supreme Court's decision in Standard Oil. The FMCRA's primary purpose was to enable the government to recoup some of the millions of dollars it expends annually providing medical care to military personnel whose injuries are the result of the tortious conduct of third parties. In addition, the FMCRA was designed to prevent the unjust enrichment of victims, who were able to recover under the permissive decisions allowing recovery under the collateral source doctrine, and tortfeasors and their insurance companies, who benefited from windfall savings. ¹⁰

Although the government only had a derivative right of subrogation under the original draft of the Act, ¹¹ subsequent amendments granted the government the right to sue independently. Currently, the FMCRA expressly permits the government to enforce its right of recovery either by direct legal action or by intervening or joining in any action brought by the injured party against the third-party tortfeasor. 42 U.S.C. Sec. 2651(b). The independent right to sue, however, does not mean that an independent cause of action exists in all circumstances. The FMCRA states:

In any case in which the United States is authorized or required by law to furnish hospital, medical, surgical, or dental care and treatment ... to a person who is injured or suffers a disease, after the effective date of this Act, under circumstances creating a tort liability upon some third person ... to pay damages therefor, the United States shall have a right to recover from said third person the reasonable value of the care and treatment so furnished.

42 U.S.C. Sec. 2651(a) (emphasis added). The language of the FMCRA, therefore, clearly limits the government's right of recovery to situations where state law imposes tort liability upon a negligent person.

The government argues, nonetheless, that its right of recovery is distinct from, and independent of, the injured party's right to recover in a state law action. The FMCRA, it argues, entitles the government to recover whether or not the injured party would be entitled to recover those expenses in a state law tort action against the tortfeasor. In support of this proposition, the government cites several cases whose holdings ostensibly permit the government to recover, regardless of the state's tort law. See, e.g., United States v. Haynes, 445 F.2d 907 (5th Cir.1971); United States v. Moore, 469 F.2d 788 (3d Cir.1972), cert. denied, 411 U.S. 905, 93 S.Ct. 1528, 36 L.Ed.2d 195 (1973). We believe that these cases are inapposite because they rely upon a distinction between substantive and procedural law. The Kentucky statute, however, poses no such problem because it is unequivocal on its face. Having abolished the cause of action completely, the Kentucky statute extinguishes the government's FMCRA claim.

III.

Since the Supreme Court announced, in Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), that there are no federal general substantive rules of common law which either the Congress or federal courts can make applicable in a state, federal courts have grappled with whether a particular rule of law falls within the procedural or substantive category.

However, we need not determine whether Kentucky's statute is procedural or substantive since the government's right to recover is subject to the statutory condition precedent of the existence of "circumstances creating tort liability upon some third person." 42 U.S.C. Sec. 2651(a). The government's independent right of recovery, therefore, is not independent in the sense that it is based upon a separate pecuniary loss distinct from Troxell's right to recover under a state law cause of action in tort. Instead, the FMCRA only confers a right of recovery when a beneficiary is injured by conduct which subjects the third-party actor to tort liability to the beneficiary. In essence, the government stands in a position similar to that of a subrogee to the state law claim of the beneficiary against the tortfeasor. In that regard, we agree with the reasoning of the Third Circuit in Heusle v. Nat'l Mut. Ins. Co., 628 F.2d 833, 836-38 (3d Cir.1980). See also United States v. Travelers Indem. Co., 729 F.2d 735, 737 (11th Cir.1984). Accordingly, state substantive law is the basis for determining whether tort liability exists for purposes of an FMCRA claim.

Recognizing that the FMCRA looks to state law for a determination of liability, the government nonetheless claims that its independent FMCRA right may...