Williams v. Katz

Decision Date08 June 1994
Docket NumberNo. 93-3332,93-3332
Citation23 F.3d 190
PartiesJerry G. WILLIAMS and Theresa Williams, Plaintiffs-Appellees, v. Allen B. KATZ and Goldberg, Fohrman, Weisman & Cairo, Limited, Defendants-Appellees. Appeal of UNITED AIRLINES, INCORPORATED, Intervening Petitioner, Appellant.
CourtU.S. Court of Appeals — Seventh Circuit

Mark S. Grotefeld (argued), Aneta B. Sunaitis, Robins, Kaplan, Miller & Ciresi, Chicago IL, John P. Borman, Robins, Kaplan, Miller & Ciresi, St. Paul, MN, for plaintiffs.

Elliot R. Schiff, Craig Wynn Church (argued), Kevin F. Donohue, O'Connor, Schiff & Myers, Chicago, IL, for defendant-appellee.

Erica Nan Goldmann, John Francis O'Reilly, Thomas W. Weber (argued), Wiedner & McAuliffe, Chicago, IL, for appellant.

Before POSNER, Chief Judge, and COFFEY and ROVNER, Circuit Judges.

POSNER, Chief Judge.

We are asked to decide whether under the law of Illinois an employer that pays workers' compensation benefits to an injured employee may ever assert a lien in a judgment or settlement obtained by the employee in a suit for legal malpractice. The issue, a novel one in Illinois, has divided the other appellate courts to consider it. Compare Toole v. EBI Cos., 314 Or. 102, 838 P.2d 60 (1992); McDowell v. LaVoy, 63 A.D.2d 358, 408 N.Y.S.2d 148 (1978), aff'd, 47 N.Y.2d 747, 417 N.Y.S.2d 255, 390 N.E.2d 1179 (1979); and Tallerday v. Delong, 68 Wash.App. 351, 842 P.2d 1023 (1993), all answering "yes," with Sladek v. K Mart Corp., 493 N.W.2d 838 (Ia.1992); Travelers Ins. Co. v. Breese, 138 Ariz. 508, 675 P.2d 1327, 1331-32 (App.1983); Soliz v. Spielman, 44 Cal.App.3d 70, 118 Cal.Rptr. 127 (1974), and Wausau Ins. Cos. v. Fuentes, 215 N.J.Super. 476, 522 A.2d 440 (App.1986), all answering "no." The court in Sladek acknowledged, however, that its interpretation was contrary to the policy of the statute, 493 N.W.2d at 841; and in Fuentes the language of the statute was stronger for the plaintiff than it is in our case.

Jerry Williams, a baggage handler for United Airlines, injured his arm at work. Two doctors failed--negligently, we may assume--to diagnose a ruptured biceps tendon. Williams claims to have suffered severe and permanent injury as a result of this failure. He obtained workers' compensation benefits in the amount of $226,000 from United. He asked the lawyers who were representing him in the workers' compensation case whether he might have a medical malpractice claim against the doctors. The lawyers are alleged to have dithered until the statute of limitations expired, so Williams (and his wife, who would have been a coplaintiff in his medical malpractice suit had one been filed, seeking damages for loss of consortium) filed with the aid of a new lawyer this diversity suit charging legal malpractice and seeking $3 million in damages. Pre-trial discovery is under way.

United Airlines moved to intervene in the legal-malpractice suit, as of right, under Fed.R.Civ.P. 24(a), claiming a lien of $226,000 against any judgment or settlement received by Mr. Williams (but not his wife) in the suit. The basis of this claim is section 5(b) of the Illinois workers' compensation statute, 820 ILCS 305/5(b), which provides that "where the injury or death for which compensation is payable under this Act was caused under circumstances creating a legal liability for damages on the part of some person other than his employer to pay damages," suit may be brought against such person; and if the suit is brought by the employee or his representative, "the employer may have or claim a lien upon any award, judgment or fund out of which such employee might be compensated from such third party." The district court denied the motion to intervene, holding that the lawyers whom Williams has sued are not the sort of third party to whom the Act refers, so United has no lien and hence no basis for intervening. United has appealed from this order. We must consider first whether it is appealable.

The order does not of course wind up the suit in the district court, so it is not conventionally final. But it is final as to United, which having been denied the status of a party will never be able to appeal again in this proceeding unless the order denying intervention is reversed now. Marino v. Ortiz, 484 U.S. 301, 108 S.Ct. 586, 98 L.Ed.2d 629 (1988) (per curiam); United States v. City of Chicago, 870 F.2d 1256, 1258 (7th Cir.1989). An order denying intervention was held appealable on this ground in Brotherhood of Railroad Trainmen v. Baltimore & Ohio R.R., 331 U.S. 519, 524-25, 67 S.Ct. 1387, 1390, 91 L.Ed. 1646 (1947), without reference to the collateral order doctrine (on which see, e.g., Crist v. Miller, 846 F.2d 1143 (7th Cir.1988)), which had not yet crystallized. Cohen v. Beneficial Industrial Loan Corp., 337 U.S. 541, 546-47, 69 S.Ct. 1221, 1225-26, 93 L.Ed. 1528 (1949). In Stringfellow v. Concerned Neighbors in Action, 480 U.S. 370, 377-78, 107 S.Ct. 1177, 1182-83, 94 L.Ed.2d 389 (1987), the Supreme Court, citing Railroad Trainmen, confirmed the continued validity of the special doctrine of that case. See also Marino v. Ortiz, supra, 484 U.S. at 304, 108 S.Ct. at 587.

The order denying United's petition to intervene is therefore appealable, although we note in the interest of doctrinal simplification that the same conclusion would be reached under the collateral order doctrine, making the special rule based on Railroad Trainmen superfluous. The question whether United has a lien in any recovery that Williams obtains in his malpractice suit, and hence a stake in the conduct of the suit, is entirely separate from ("collateral to") the questions in the suit itself, which have to do with the defendants' alleged malpractice and the damages that it caused the plaintiffs. And the order denying intervention will not be effectively reviewable if and when the final judgment that may eventually be entered in the malpractice suit is appealed. Although there are plenty of exceptions to the rule that nonparties may not appeal, 15A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure Sec. 3902.1 (2d ed. 1992), the Marino and City of Chicago cases cited above hold that a person who has been refused intervention may not appeal from the final judgment in the suit unless he can get the order denying his motion to intervene reversed. See also id., Sec. 3902.1, at p. 112. This is not critical if the would-be intervenor's interest is adequately represented by any of the existing parties to the suit, but there would be no right to intervene in such a case in any event. The right depends on the inadequacy of representation by existing parties (Fed.R.Civ.P. 24(a)) and if that is the situation then by definition review at the end of the case may come too late--the plaintiff may have kissed away the intervenor's interest by settling the case for less than the value of that interest.

The plaintiffs may be adequate representatives of United Airlines in this case, in which event as we have just noted Rule 24(a) would not apply even though United had a lien. This is so even though the Illinois workers' compensation statute expressly entitles the employer to intervene to protect his lien. That right, as opposed to the lien itself, is a purely procedural right and even in a diversity suit it is the Federal Rules of Civil Procedure rather than state law that dictate the procedures, including who may intervene, to be followed. Venegas v. Skaggs, 867 F.2d 527, 530 n. 2 (9th Cir.1989), aff'd under the name Venegas v. Mitchell, 495 U.S. 82, 110 S.Ct. 1679, 109 L.Ed.2d 74 (1990); 7C Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure Sec. 1905 (2d ed. 1986). If Williams gets anywhere near $3 million from the defendants there will be plenty for United if it...

To continue reading

Request your trial
21 cases
  • Haugenoe v. Workforce Safety and Ins.
    • United States
    • North Dakota Supreme Court
    • 22 Abril 2008
    ...subrogation interest in legal malpractice proceeds. See Frazier v. N.J. Mfrs. Ins. Co., 142 N.J. 590, 667 A.2d 670 (1995); Williams v. Katz, 23 F.3d 190 (7th Cir.1994) (interpreting Illinois law); Nicholas v. Morgan, 58 P.3d 775 (Okla.2002); Tallerday v. Delong, 68 Wash.App. 351, 842 P.2d 1......
  • Kleber v. CareFusion Corp.
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • 26 Abril 2018
    ...Internal Revenue , 74 F.3d 1528, 1532 (7th Cir. 1996) (appealing "denial of ‘innocent spouse’ status" in Tax Court); Williams v. Katz , 23 F.3d 190, 191 (7th Cir. 1994) (spurned intervenor permanently "denied the status of a party" in litigation); Lister v. Hoover , 655 F.2d 123, 124–25 (7t......
  • Kleber v. Carefusion Corp.
    • United States
    • U.S. Court of Appeals — Seventh Circuit
    • 23 Enero 2019
    ...of Internal Revenue , 74 F.3d 1528, 1532 (7th Cir. 1996) (appealing Tax Court’s "denial of ‘innocent spouse’ status"); Williams v. Katz , 23 F.3d 190, 191 (7th Cir. 1994) (spurned intervenor permanently "denied the status of a party" in litigation); Lister v. Hoover , 655 F.2d 123, 124–25 (......
  • Rhode Island v. U.S.E.P.A.
    • United States
    • U.S. Court of Appeals — First Circuit
    • 3 Agosto 2004
    ...satisfies the second prong of the test; the issue is separable from the merits of the underlying proceeding. Cf. Williams v. Katz, 23 F.3d 190, 192 (7th Cir.1994) (holding that the question of a putative intervenor's status was "entirely separate from" the underlying tort action). The first......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT