Unisys Medical Plan v. Timm
| Decision Date | 23 October 1996 |
| Docket Number | No. 96-1312,96-1312 |
| Citation | 98 F.3d 971 |
| Parties | UNISYS MEDICAL PLAN, Plaintiff-Appellee, v. Gary TIMM and Kandis Timm, Defendants-Appellants. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Ronald L. Lipinski (argued), Keri B. Goldstein, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, IL, for Plaintiff-Appellee.
Matthew A. Biegert (argued), Doar, Drill & Skow, New Richmond, WI, for Defendants-Appellants.
Before CUMMINGS, BAUER and EVANS, Circuit Judges.
After Gary and Kandis Timm settled a state court personal injury case, the Unisys Medical Plan, a self-funded employee welfare benefit plan governed by the Employee Retirement Security Act (ERISA), 29 U.S.C. § 1001 et seq., sued the Timms in federal court, seeking reimbursement of medical expenses it paid on Mr. Timm's behalf. After Unisys moved for summary judgment, the Timms moved to stay the federal case, arguing that it should be put on ice while the state court case was still active. The Timms also raised the affirmative defenses of waiver and estoppel based on Unisys' failure to timely answer a third-party complaint brought by two defendants in the state court matter. The district court denied the stay and granted summary judgment for Unisys. As we'll explain below, we affirm. First the facts.
Gary Timm was injured in a farm accident in 1991, and his insurer, Unisys, paid his medical bills to the tune of $55,484.45. The plan required Mr. Timm to reimburse Unisys if he received outside compensation for his injuries. In 1993, the Timms sued a number of parties allegedly responsible for the accident in the circuit court for St. Croix County, Wisconsin. Sensing a possible subrogation claim, two of the defendants impleaded Unisys as a third-party defendant in the suit under Wisconsin Statute § 803.03(2). Although Unisys was impleaded on November 17, 1994, it thought the case was going to settle so it did not file an answer to the third-party complaint. In February 1995, however, Unisys believed the settlement negotiations had broken down, so it sought leave to file a late answer. It also requested permission to file a cross-claim against the Timms. In May 1995, the Timms settled the personal injury case for $255,462.81. In the stipulated order of dismissal, the Timms agreed to hold the defendants harmless if Unisys was allowed to pursue subrogation. In August 1995, the state court denied Unisys leave to file the cross-claim and eventually entered a default judgment.
Meanwhile, after the Timms settled, Unisys filed this suit in the United States District Court for the Western District of Wisconsin, seeking reimbursement under ERISA. Unisys moved for summary judgment. The Timms countered with a motion to stay pending resolution of the state court litigation. The district court denied the request, finding that the state litigation did not preclude Unisys' federal suit. The court then proceeded to grant summary judgment for Unisys. The Timms appeal both the denial of the motion to stay and the grant of summary judgment.
The Timms first challenge the denial of their motion to stay the federal case. The state litigation, they say, precludes a federal suit for reimbursement. The district court, whose decision to reject the stay we review for an abuse of discretion, disagreed. So do we. Under Wisconsin law, claim preclusion bars suits between the same parties on causes of action which have already been litigated or could have been litigated in an earlier proceeding. Northern States Power Co. v. Bugher, 189 Wis.2d 541, 550, 525 N.W.2d 723, 727 (1995). Because the Timms and Unisys were not adversaries in state court, Unisys' suit for reimbursement does not involve the same parties as the Timms' personal injury action. See United States Fidelity & Guar. Co. v. Goldblatt Bros., Inc., 142 Wis.2d 187, 191, 417 N.W.2d 417, 419 (Ct.App.1987) (requiring "formally adverse" parties). Only if Unisys had been allowed to cross-claim against the Timms would the parties have been sufficiently adverse. See Gies v. Nissen Corp., 57 Wis.2d 371, 204 N.W.2d 519 (1973).
Claim preclusion's little brother, issue preclusion, also does not bar Unisys' suit for reimbursement. While issue preclusion does not require identity of parties, the doctrine only bars consideration of issues "actually litigated" in an earlier proceeding. Northern States Power, 189 Wis.2d at 550-51, 525 N.W.2d at 727. Here, we have only a default judgment based on Unisys' failure to answer the third-party complaint in a timely manner. While default judgments can give rise to issue preclusion in some circumstances, see Heggy v. Grutzner, 156 Wis.2d 186, 193-94, 456 N.W.2d 845, 849 (Ct.App.1990), we need not address that issue because Unisys' reimbursement claim could not have been litigated in the state case. Unlike subrogation, which arises under state law and allows the insurer to stand in the shoes of its insured, reimbursement is a...
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