Tim Mackey v. Terri Lynn Johnson , 868 F.3d 726 ( 2017 )

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 16-1886
___________________________
Tim Mackey; John Nesse, as Trustees of the Minnesota Laborers Health and
Welfare Fund,
lllllllllllllllllllll Plaintiffs - Appellees,
v.
Terri Lynn Johnson, as Trustee for the Heirs and Next of Kin of Timothy M.
Scherf; Meshbesher & Spence, Ltd.,
lllllllllllllllllllll Defendants - Appellants,
The Duluth Clinic, Ltd., doing business as Essentia Health Deer River Clinic,
lllllllllllllllllllll Defendant - Appellee.
____________
Appeal from United States District Court
for the District of Minnesota - Minneapolis
____________
Submitted: February 9, 2017
Filed: August 22, 2017
____________
Before LOKEN, COLLOTON, and KELLY, Circuit Judges.
____________
COLLOTON, Circuit Judge.
Terri Johnson brought a wrongful-death action against the Duluth Clinic,
alleging that the Clinic was negligent in its treatment of her brother’s lung cancer.
Johnson’s brother was a participant in the Minnesota Laborers Health and Welfare
Fund, and the Fund paid for his medical treatment. Johnson settled her claim with the
Clinic. The Fund then sued Johnson, her legal counsel Meshbesher & Spence, and the
Clinic under the Employee Retirement Income Security Act, 29 U.S.C. § 1132(a)(3).
The Fund alleged that it had a right to a portion of the settlement attributable to
medical expenses. The district court1 agreed and granted summary judgment for the
Fund in the amount of $236,700.16. Johnson and Meshbesher challenge the ruling,
but we reject their arguments and affirm the judgment.
I.
In March 2010, Timothy Scherf was admitted to the Duluth Clinic with chest
pressure. A chest x-ray revealed a “12mm nodular opacity.” Although the x-ray
report recommended a CT scan of Scherf’s chest, Scherf alleged that he was not
informed of the abnormality or the need for follow-up tests. In October 2011, Scherf
was diagnosed with Stage IV lung cancer and began treatment. Scherf was a
participant in the Minnesota Laborers Health and Welfare Fund. Under the Fund’s
Plan, the Fund paid for Scherf’s medical treatment. The Plan also stated that if the
Fund provided medical benefits on behalf of a plan participant, and the participant
recovered payment for those benefits from a third party, then the Fund had a first
priority subrogation interest in that payment.
1
The Honorable Paul A. Magnuson, United States District Judge for the District
of Minnesota.
-2-
In March 2012, Scherf hired Meshbesher & Spence to bring a medical
negligence claim against the Clinic. Meshbesher notified the Fund of the potential
claim. The Fund responded with a letter asserting a first priority right of subrogation
under the Plan, and later sent a subrogation agreement. Scherf and Johnson, who had
been given power of attorney over Scherf’s affairs, signed the subrogation agreement
and affirmed the Fund’s subrogation right. In August 2012, Scherf died from lung
cancer. The Fund presented undisputed evidence that it paid $236,700.16 for Scherf’s
treatment.
Johnson, represented by Meshbesher, commenced a wrongful-death action
against the Clinic on behalf of Scherf’s heirs and next of kin, seeking damages under
Minnesota’s wrongful-death statute. See Minn. Stat. § 573.02. Before a mediation,
Johnson provided the mediator with a letter outlining the relevant facts and a summary
of potential liability and damages. The “Damages” section of the letter included
“Medical Expenses: $220,108.06 (subrogation interest asserted by the Minnesota
Laborers Health & Welfare Fund – a self-funded ERISA Plan).” The letter also
included claims for funeral expenses ($4,178.66), lost earnings ($337,000), and “[l]ost
advice, comfort, support, protection, companionship, etc.” (amount “[t]o be
determined”).
During mediation, Meshbesher took the position that the Fund had no
subrogation interest in Johnson’s wrongful-death claim, and that the Clinic was
“offering nothing with respect to the med expenses.” The Fund responded that it
disagreed, “especially in light of the fact that you have included a claim for medical
expenses,” and it provided a copy of the Plan’s subrogation provision. Meshbesher
replied: “Actually, for purposes of this mediation, we are not including the claim for
medical expenses. As I told you, the defenses [sic] position is that we have no
obligation to repay your client a penny. So medical expenses are not part of this
mediation.”
-3-
Johnson and the Clinic ultimately reached a settlement agreement. The
agreement provided that “[t]his settlement includes all applicable medical liens and
subrogation claims.” A handwritten note on the settlement agreement stated:
“Claimants deny that [the] Fund is entitled to any portion of the settlement proceeds.”
A few months later, the parties executed a more detailed settlement agreement and
release. The release discharged the Clinic from “any claims, actions, causes of action
and assertions of liability of every type on account of, or in any way arising out of,
any and all injuries and damages, known or unknown . . . suffered or sustained by
[Johnson] as a result of the medical care and treatment” rendered to Scherf by the
Clinic from March 2010 to August 2012. The settlement agreement also provided that
Johnson “acknowledges that [the Fund] has asserted a lien and/or subrogation claim
for certain medical expenses,” and that she “represents, warrants and agrees that she
will satisfy [the Fund’s] subrogation rights, if any, as determined by a court of
competent jurisdiction.”
After the settlement, the Fund sued Johnson, Meshbesher, and the Clinic under
ERISA, alleging that Johnson had failed to reimburse it for $236,700.16 that the Fund
paid for Scherf’s medical expenses. The Fund moved for summary judgment and
argued that it was entitled to the medical expenses included in the settlement proceeds
under the terms of the Plan and the subrogation agreement. The district court agreed
and granted summary judgment for the Fund in the amount of $236,700.16. We
review the district court’s grant of summary judgment de novo, viewing the evidence
and drawing all reasonable inferences in the light most favorable to Johnson and
Meshbesher. Malloy v. U.S. Postal Serv., 756 F.3d 1088, 1090 (8th Cir. 2014).
II.
Johnson and Meshbesher devote much of their argument to whether a wrongful-
death trustee can recover medical expenses in a wrongful-death action under Minn.
-4-
Stat. §§ 573.01 and 573.02.2 We think this issue is beside the point. A settlement
agreement is a contract. Dykes v. Sukup Mfg. Co., 781 N.W.2d 578, 581 (Minn.
2010). Minnesota public policy favors the freedom of contract, see Lyon Fin. Servs.,
Inc. v. Ill. Paper & Copier Co., 848 N.W.2d 539, 545 (Minn. 2014), and parties can
contract to settle any claim, even if the claim has little support in the law. Here,
Johnson had at least a colorable argument based on the statutory text of Minn. Stat.
§§ 573.01 and 573.02 that she was entitled to recover Scherf’s medical expenses. The
statutes allow for a wrongful-death trustee to bring an action if the decedent could
have brought an action for an injury caused by the alleged wrongful act. This at least
suggests that the trustee could bring an action that includes a claim for the decedent’s
medical expenses. See Prescott v. Swanson, 267 N.W. 251, 258 (Minn. 1936)
(rejecting argument that medical expenses were not recoverable by next of kin in a
wrongful death action under predecessor statute with comparable text); see also
Ashley N. Biermann, Note, The Practical Effects of Dickhoff v. Green on Wrongful
2
Minn. Stat. § 573.01 provides that a “cause of action arising out of an injury
to the person dies with the person of the party in whose favor it exists, except as
provided in section 573.02.” Minn. Stat. § 573.02, subd. 1. provides:
Death action. When death is caused by the wrongful act or omission of
any person or corporation, the trustee appointed as provided in
subdivision 3 may maintain an action therefor if the decedent might have
maintained an action, had the decedent lived, for an injury caused by the
wrongful act or omission. . . . The recovery in the action is the amount
the jury deems fair and just in reference to the pecuniary loss resulting
from the death, and shall be for the exclusive benefit of the surviving
spouse and next of kin, proportionate to the pecuniary loss severally
suffered by the death. The court then determines the proportionate
pecuniary loss of the persons entitled to the recovery and orders
distribution accordingly. Funeral expenses and any demand for the
support of the decedent allowed by the court having jurisdiction of the
action, are first deducted and paid. Punitive damages may be awarded
as provided in section 549.20.
-5-
Death Actions in Minnesota: Drawing a Line in the Sand or Committing to a Fair
Solution?, 40 Wm. Mitchell L. Rev. 1543, 1554-55 (2014) (“[A]ll necessary funeral,
hospital, and medical expenses are recoverable by the decedent’s heirs because this
is money that would otherwise have to come out of the decedent’s estate.”); 4A Minn.
Civ. Jury Instructions Guide 91.75. Even though there was doubt about the viability
of Johnson’s claim, see Johnson v. Consolidated Freightways, Inc., 420 N.W.2d 608,
613 (Minn. 1988), the parties were free to settle a debatable claim for a sum of money.
Johnson and Meshbesher contend, however, that Johnson and the Clinic did not
actually settle a claim for medical expenses. We look to the language of the
agreements to determine the intent of the parties. Ryan Contracting Co. v. O’Neill &
Murphy, LLP, 883 N.W.2d 236, 249 (Minn. 2016). We agree with the district court
that the settlement documents were unclear about whether the settlement included a
claim for Scherf’s medical expenses.
The initial settlement agreement provided that it “include[d] all applicable
medical liens and subrogation claims,” thus implying that the agreement encompassed
Scherf’s medical expenses. The later settlement agreement and release, however,
provided that Johnson agreed to settle and release the Clinic from all claims “on
account of, or in any way arising out of, any and all injuries and damages . . . suffered
or sustained by [Johnson]” arising out of medical treatment provided to Scherf by the
Clinic. Johnson argues that the reference to damages suffered by Johnson shows that
the agreement did not include Scherf’s medical expenses. But the parties also
acknowledged the Fund’s asserted subrogation interest in Scherf’s medical expenses,
and Johnson agreed to satisfy the Fund’s subrogation rights, if any, as determined by
a court. If the parties had intended to exclude medical expenses from the settlement,
then there would have been little reason to address the Fund’s subrogation interest.
Because the settlement agreements are susceptible to two reasonable interpretations,
they are ambiguous as to whether Johnson and the Clinic settled the medical expenses
claim. See Dykes, 781 N.W.2d at 582.
-6-
The district court then concluded based on other evidence that the settlement
agreement included Scherf’s medical expenses. We agree with this conclusion. In
Johnson’s suit against the Clinic, she sought damages permitted by Minn. Stat.
§ 573.02, and Johnson had at least a colorable argument to seek Scherf’s medical
expenses. Johnson’s pre-settlement letter to the mediator asserted a large amount of
damages for medical expenses. Johnson and Meshbesher then represented to the
district court that Johnson and the Clinic settled the claim for medical expenses.
During a hearing before the magistrate judge, Johnson and Meshbesher acknowledged
that the settlement agreements included the claim for medical expenses, although they
asserted then that the claim was settled for no money. These admissions support the
district court’s conclusion that Johnson and the Clinic settled the claim for medical
expenses.
As to the amount of the settlement, Johnson and Meshbesher argue only the
Fund’s recovery should be limited to expenses that were caused by the Clinic’s
negligence. The Fund’s subrogation right is not so limited. Under the terms of the
Plan, the Fund properly asserted a subrogation interest in “any . . . recovery” from the
Clinic for Scherf’s medical expenses. The Fund is entitled to whatever Johnson
recovered for Scherf’s medical expenses in her settlement with the Clinic, whether or
not Johnson ultimately could have recovered those expenses at trial.
For the foregoing reasons, the judgment of the district court is affirmed.
______________________________
-7-