United States v. United Serv. Automobile Ass'n

• Decision Date: 07 July 2011
• Docket Number: DOCKET NO. 2: 10-CV-01252
• Parties: UNITED STATES OF AMERICA v. UNITED SERVICES AUTOMOBILE ASSOCIATION ("USAA"), PROGRESSIVE PALOVERDE INSURANCE COMPANY AND AIMEE FERNANDEZ
• Court: U.S. District Court — Western District of Louisiana

UNITED STATES OF AMERICA v. UNITED SERVICES AUTOMOBILE ASSOCIATION ("USAA") PROGRESSIVE PALOVERDE INSURANCE COMPANY AND AIMEE FERNANDEZ

DOCKET NO. 2: 10-CV-01252

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF LOUISIANA LAKE CHARLES DIVISION

DATED: July 7, 2011

JUDGE MINALDI

MAGISTRATE JUDGE KAY

MEMORANDUM RULING

Presently before the court are cross-motions for summary judgment. A Motion for Summary Judgment (Rec. Doc. 29) was filed by the United States Automobile Association ("USAA") asking that this court find the "Made Whole" doctrine applicable to the case at bar. The United States filed an Opposition (Rec. Doc. 37) and USAA filed a Reply (Rec. Doc. 38).

The plaintiff, the United States, filed a Motion for Summary Judgment (Rec. Doc. 31) asking that this court find the "Made Whole" doctrine not applicable to the case at bar. USAA and SPC Fernandez filed an Oppositions (Rec. Docs. 39 and 40, respectively). The United States filed a Reply (Rec. Doc. 41).

SUMMARY JUDGMENT STANDARD

A court should grant a motion for summary judgment when the pleadings, including the opposing party's affidavits, "show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). The party moving for summary judgment is initiallyresponsible for demonstrating the reasons justifying the motion for summary judgment by identifying portions of pleadings and discovery that show the lack of a genuine issue of material fact for trial. Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995). The court must deny the moving party's motion for summary judgment if the movant fails to meet this burden. Id.

If the movant satisfies this burden, however, the nonmoving party must "designate specific facts showing that there is a genuine issue for trial."' Id. (quoting Celotex, 477 U.S. at 323). In evaluating motions for summary judgment, the court must view all facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). There is no genuine issue for trial, and thus a grant of summary judgment is warranted, when the record as a whole "could not lead a rational finder of fact to find for the non-moving party. . . ." Id.

FACTS AND PROCEDURAL HISTORY

On or about August 9, 2007, Specialist Aimee Fernandez ("SPC Fernandez") stopped her 2000 Chevrolet Malibu at the stop sign at the intersection of Alabama Avenue and Bell Richard Avenue on the Fort Polk Military Installation. Specialist Brian P. Gaubatz ("SPC Gaubatz") approached this intersection and failed to notice SPC Fernandez's vehicle and/or stop his 2006 Pontiac Montana, striking SPC Fernandez's vehicle in the rear. SPC Gaubatz had permission from the owner. Michael Haley, to drive the 2006 Pontiac Montana, a vehicle which was insured with United Services Automobile Association (hereinafter "USAA").¹

At the time of the accident, SPC Fernandez was an active duty Soldier in the United StatesArmy.² Because of the collision, the United States furnished and/or paid for medical care for SPC Fernandez through Bayne Jones Army Community Hospital, Brook Army Medical Center, and TRICARE in the amount of $ 11,001.00.³ Furthermore, because of the collision, SPC Fernandez was unable to perform her duties as an employee of the United States for six days and the United States incurred $329.16 in lost wages.⁴ Counsel for SPC Fernandez deposited the $15,630.51 claimed by the United States⁵ into the registry of the court.⁶

On September 17, 2007 and April 16, 2008, the Claims Division sent USAA a certified letter informing them of the United States's independent right under the Federal Medical Care Recovery Act ("FMRCA"). 42 U.S.C. § 2651 et. seq. and 10 U.S.C. § 1095 to recover the cost of SPC Fernandez's medical care⁷ and lost wages related to the August 9, 2007 accident.⁸ On or around July24, 2008, USAA and SPC Fernandez settled SPC Fernandez's injury claim for $10,000.⁹ SPC Fernandez also settled with Progressive Paloverde Insurance Company ("Progressive") for the uninsured/underinsured policy limits of $25,000.¹⁰

The Complaint mentions the amount spent for medical expenses and lost wages on behalf of SPC Fernandez as a result of this accident, however, the United States is seeking to recover the entire $35,000 paid to SPC Fernandez ($10,000 by USAA and $25,000 by Progressive).¹¹

Law

The primary issue before the court in the motion for Summary judgment filed by USAA is whether the "make whole "doctrine¹² applies to allow SPC Fernandez to be fully compensated for her injuries prior to any recovery being had by the United States for the reasonable value of medical care expenses and lost wages paid to SPC Fernandez as a result of the August 9, 2007, accident.¹³ Thisis a question of law.

USAA submits that SPC Fernandez has a right to be made whole before the United States has any right to recover any funds from USAA. USAA also submits that to the extent the United States claims that it is a third party beneficiary under USAA policy, this claim should also be rejected.

The Federal Medical Care Recovery Act ("FMCRA"), 42 U.S.C. § 2651, grants the United States a substantive right to recover from third party tortfeasors¹⁴ the reasonable value of the cost of medical services rendered to injured veterans.¹⁵ The Act provides several methods by which the United States may vindicate its substantive right. Under section 2651 (b), the United States either can intervene in the action by the veteran against the tortfeasor or, alternatively, institute an independentaction against the tortfeasor if the veteran does not do so within six months of the injury. Most significant for this action, in a more general provision, the Act provides that "as to this right [the United States shall] be subrogated to any right or claim" of the injured veteran. 42 U.S.C. § 2651 (a).

Subrogation is a broad equitable remedy long used by courts to balance the interests of adverse parties and prevent unjust enrichment.¹⁶ In affording the United States this broad equitable remedy, the FMCRA creates the basis for the United States's present action against SPC Fernandez, USAA and Progressive. The FMCRA clearly provides the motivation for SPC Fernandez's attorney to set aside a portion of the settlement pending appropriate settlement with the United States. The United States's claim to this fund derives from its being subrogated to SPC Fernandez's claim. 42 U.S.C §2652(c) provides the following regarding the unaffected rights of the injured party to fully recover before any subrogation rights may be exercised under 42 U.S.C. §2651:

(c) Damages recoverable for personal injury unaffected

No action taken by the United States in connection with the rights afforded under this legislation shall operate to deny to the injured person the recovery for that portion of his damage not covered hereunder.

This is the language of §2652(c) that provides the basis for the "Made Whole" doctrine.

Additionally, 31 U.S.C. § 3713, governing priority of United States claims for recovery of benefits, provides the following:

(a)(1) A claim of the United States shall be paid first when-

(A) a person indebted to the United States is insolvent and-

(I) the debtor without enough property to pay all debts makes a voluntary assignmentof property....

Case law addressing the issue of whether SPC Fernandez must first be "made whole" prior to United States recovery is scarce. As noted by USAA, the only case to directly address this issue is Allen v. United States.¹⁷ In Allen, the court specifically addressed the issues of (1) whether an insurance carrier with limits insufficient to cover all of the plaintiff's damages was considered an "insolvent" debtor within the meaning of § 3713(a)(l)(A)(I); and (2) whether under § 2652(c) a plaintiff is entitled to be made whole before the United States can recover payments pursuant Title 42.

In denying the United States's Motion for Summary Judgment that it was entitled to settlement proceeds prior to, and in derogation of, the rights of the injured party, the court stated the following:

... The United States contends that if the claims arising out of the accident exceed the USAA policy limits, USAA is an "insolvent" party as referenced in § 3713.

There is no basis for the United States's position. USAA is not the debtor in this case. Col. Allen is, and it is to his solvency factually, his estate's) to which the statute applies. Yet the United States has made no claim against his estate, and has failed even to assert, let alone demonstrate, that the estate is insolvent. USAA, by contrast, simply holds, or held, an asset of the estate. It is Col. Allen's indemnitor up to the maximums stipulated in the policy. Far from being unable to discharge its obligation, USAA has paid its obligation in full by depositing it with the Clerk of Court. (Internal citations omitted).

668 F. Supp. at 1257-1258.

The court found that USAA was neither a debtor, nor insolvent, within the meaning of Title 31, and rejected the United States's arguments that it should be paid first on these grounds. In addressing the issue of whether a Plaintiff is entitled to be made whole before the United States canrecover payments pursuant Title 42, the court engaged in an in-depth analysis, first finding that the provisions of § 2651 speak in terms of subrogation, and not reimbursement.¹⁸ Finding that, by its plain language, § 2651 provides for a right of recovery in favor of the United States based upon subrogation, the court then explained the application of § 2652(c) as follows:

There is another flaw in the United States's contention. The FMCRA itself speaks to the priority issue....

Subsection (c) was not part of the original bill. The purpose of adding the provision, according to the House Committee Report, was to make clear Congress' intent that the United States's

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