Continental Insurance Company v. David Dawson , 642 F. App'x 309 ( 2016 )

Case: 15-10510 Document: 00513424063 Page: 1 Date Filed: 03/15/2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 15, 2016
No. 15-10510
Lyle W. Cayce
Clerk
CONTINENTAL INSURANCE COMPANY, as Assignee of Aetna Life
Insurance Company, of Hartford Connecticut,
Plaintiff–Appellant,
v.
DAVID DAWSON,
Defendant–Appellee.
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:13-CV-4150
Before KING, JOLLY, and PRADO, Circuit Judges.
PER CURIAM:*
Continental Insurance Company (“Continental”), acting as an assignee,
filed a lawsuit in federal district court to enforce its subrogation and
reimbursement rights against David Dawson. The district court granted
summary judgment in favor of Dawson, holding that a prior agreement
between Dawson and Continental precluded Continental’s recovery. Because
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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we conclude that the district court misconstrued the parties’ agreement, we
REVERSE and REMAND.
I. FACTUAL AND PROCEDURAL BACKGROUND
On November 16, 2007, David Dawson was severely injured in the course
of his employment with Hill International, Inc. (“Hill”) in Baghdad, Iraq.
Dawson suffered burns from dangerously hot water while taking a shower in
his assigned living quarters. Continental was Hill’s workers’ compensation
carrier and, as such, was required to pay for Dawson’s medical expenses and
indemnity in accordance with the Longshore and Harbor Workers’
Compensation Act (“LHWCA”), 33 U.S.C. §§ 901–950. Aetna Life Insurance
Company (“Aetna”) was Dawson’s group health insurance carrier through
Hill’s employee benefit plan established under the Employee Retirement
Income Security Act (“ERISA”), 29 U.S.C. §§ 1001–1091c.
Dawson was initially treated in Germany. The expenses for Dawson’s
overseas treatment were billed to Aetna, rather than to Continental. Between
November 18, 2007, and January 24, 2008, Aetna paid $282,774.51 to overseas
medical providers on behalf of Dawson. Continental paid for Dawson’s
subsequent medical treatment.
In 2009, Dawson filed a lawsuit in Texas state court against Fluor
Intercontinental, Inc. (“Fluor”), which managed Dawson’s living quarters in
Iraq. Both Continental and Aetna intervened in the state lawsuit, asserting
liens upon any settlement or judgment obtained against Fluor for the amounts
they paid to or on behalf of Dawson. In April 2010, Continental and Dawson
executed a settlement agreement (the “Settlement Agreement”) pursuant to
§ 8(i) of the LHWCA, 33 U.S.C. § 908(i). 1 The Settlement Agreement was
1 A settlement reached under § 908(i) is commonly referred to as a § 8(i) settlement.
Cooper v. Int’l Offshore Servs., L.L.C., 390 F. App’x 347, 348 n.1 (5th Cir. 2010).
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approved one month later by the U.S. Department of Labor (“DOL”). It
provided in pertinent part:
1. [Continental] will pay [Dawson] a lump sum of
$260,759.68 in return for a complete discharge of [Continental’s]
liability for compensation and past medical care arising out of the
subject injury . . . .
2. [Continental] further agree[s] to provide payment for any
reasonable and necessary medical treatment related to the injury
of November 16, 2007 that should arise prior to the date of
approval of this agreement.
3. [Continental] assert[s] a lien upon any settlement or
judgment obtained in favor of [Dawson] in his lawsuit against
Fluor . . . .
Pursuant to the Settlement Agreement, Continental’s lien amounted to
$388,457.67. Ultimately, after the jury in Dawson’s state lawsuit rendered
judgment in his favor, he entered into a confidential settlement with Fluor and
paid Continental the full amount of its lien under the Agreement.
In May 2012, Aetna filed a claim with the DOL against Continental for
reimbursement of the medical benefits Aetna had paid on Dawson’s behalf.
Aetna and Continental agreed to settle this claim. In exchange for a payment
of $219,000 from Continental, Aetna assigned to Continental its subrogation
and reimbursement rights connected to Dawson’s medical treatment.
Continental thereafter sought a stipulation from Dawson regarding those
rights. After Dawson refused, Continental filed this suit in federal district
court, seeking to enforce Aetna’s subrogation and reimbursement rights
related to Aetna’s payments of $282,774.51 for Dawson’s overseas medical
treatment.
The district court denied Continental’s motion for summary judgment
and granted Dawson’s cross-motion for summary judgment against
Continental. Applying Texas law, the court held that the terms of the
Settlement Agreement obligated Continental to pay for Dawson’s past medical
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treatment, i.e., treatment provided before the DOL ratified the Settlement
Agreement, which included Aetna’s payments on Dawson’s behalf. In turn, the
court held that the Settlement Agreement precluded Continental from
enforcing the subrogation rights that Aetna had assigned to it and limited
Continental’s recovery from Dawson to the amount of its lien specified in the
Agreement, which Dawson had already paid. This appeal followed.
II. STANDARD OF REVIEW
We review the district court’s judgment on cross-motions for summary
judgment de novo. McCorkle v. Metro. Life Ins. Co., 757 F.3d 452, 456 (5th Cir.
2014). Summary judgment is appropriate “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a).
III. DISCUSSION
Dawson’s employee benefits plan, which was governed by ERISA,
provided Aetna with subrogation and reimbursement rights pertaining to
third-party liability for his injuries. Dawson does not dispute that Aetna was
a fiduciary of the plan. Under 29 U.S.C. § 1132(a)(3), an ERISA fiduciary may
bring suit for “appropriate equitable relief . . . to enforce . . . the terms of the
plan.” Therefore, Continental—as an assignee of Aetna’s subrogation and
reimbursement rights—has derivative standing to enforce claims under 29
U.S.C. § 1132. See La. Health Serv. & Indem. Co. v. Rapides Healthcare Sys.,
461 F.3d 529, 537 (5th Cir. 2006).
A. The 2010 Settlement Agreement and the 2013 Assignment
Continental argues that the district court erred in holding that the
Settlement Agreement required it to pay for Dawson’s past medical treatment
and thus precluded any subsequent recovery for those payments beyond those
contemplated by the Settlement Agreement. We agree.
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The parties do not dispute the district court’s conclusion that Texas law
governs the interpretation of the Settlement Agreement. Under Texas law, “a
contract is to be construed in accordance with its plain language.” Gen. Am.
Indem. Co. v. Pepper, 339 S.W.2d 660, 661 (Tex. 1960). “[C]ourts should
examine and consider the entire writing in an effort to harmonize and give
effect to all the provisions of the contract so that none will be rendered
meaningless.” Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). The
interpretation of an unambiguous contract is a question of law. Heritage Res.,
Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996).
Under Section 2 of the Settlement Agreement, Continental agreed “to
provide payment for any reasonable and necessary medical treatment . . . that
should arise prior to the approval of this agreement.” The phrase “should arise”
is forward looking and refers to a future contingency. See Randolph Quirk et
al., A Comprehensive Grammar of the English Language 1093 (1985) (stating
that the word “should” followed by the infinitive expresses a future
hypothetical condition). Thus, a plain reading of Section 2 reveals that the
parties agreed that Continental would be required to pay only for future
medical expenses incurred between the date of the Agreement and the date of
the requisite DOL approval, rather than for all past medical expenses incurred
before the Agreement was executed.
This construction of Section 2 is supported by the Settlement
Agreement’s other provisions. Section 1 provides that Continental was to
receive “a complete discharge of [its] liability for . . . past medical care arising
out of [Dawson’s] injury.” Dawson fails to explain how the Agreement can both
completely discharge Continental’s liability for past medical care and, at the
same time, require it to pay for additional past medical treatment. Indeed,
Dawson does not point to any medical expense incurred prior to the date of the
agreement for which Continental’s liability would have been discharged under
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his reading of the Settlement Agreement. For Section 1’s discharge of
Continental’s liability for past medical treatment to have any effect, Section 2
must be construed to obligate Continental to pay only for medical treatment
that should arise after the Agreement’s execution date. See Coker, 650 S.W.2d
at 393.
We therefore conclude that the Settlement Agreement did not require
Continental to repay Aetna for Dawson’s past medical treatment and, in turn,
does not preclude Continental’s recovery of the subrogation and
reimbursement rights that Aetna had assigned to it.
B. Waiver
Alternatively, Dawson argues that, regardless of the Settlement
Agreement’s effect, Aetna waived its ability to enforce its subrogation rights
and that Continental, acting as an assignee, cannot enforce the interests that
Aetna has waived. An assignee, such as Continental, is “subject to any
defenses, limitations, or setoffs that could be asserted against the assignor’s
rights.” See Quality Infusion Care, Inc. v. Health Care Serv. Corp., 628 F.3d
725, 729 (5th Cir. 2010) (emphasis omitted) (quoting Adams v. Petrade Int’l,
Inc., 754 S.W.2d 696, 721 (Tex. App.—Houston [1st Dist.] 1988)). Under Texas
law, “[w]aiver is an intentional relinquishment of a known right or intentional
conduct inconsistent with claiming that right.” Sun Expl. & Prod. Co. v.
Benton, 728 S.W.2d 35, 37 (Tex. 1987). Dawson claims that the waiver occurred
when, in the course of Aetna’s DOL proceeding against Continental, Aetna
stated that it was not seeking payment from Dawson in that proceeding.
We find Dawson’s argument unavailing. Aetna’s statements that it did
not seek payment from Dawson through an administrative proceeding to
which, according to Aetna, Dawson was not a party does not amount to an
intentional relinquishment of its subrogation rights nor conduct that is
inconsistent with claiming those rights. Aetna continued to seek enforcement
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of its subrogation interest in Texas state court after it made that statement. 2
Further, during that same administrative proceeding, Aetna entered into a
§ 8(i) settlement agreement, which the DOL ratified, that expressly reaffirmed
the value of its lien against Dawson. Cf. Ferrell v. Charles Mach. Works Inc.,
156 F.3d 182, 1998 WL 546522, at *5 (5th Cir. Aug. 13, 1998) (unpublished)
(finding no waiver of ERISA subrogation rights given the lack of an “express
waiver . . . in a settlement document, judicial or otherwise”). Under the
settlement, Aetna agreed both to assign the full value of its $282,774.51 lien
against Dawson and to assist Continental in collecting that lien in Dawson’s
then-pending state lawsuit. Thus, Continental can assert the subrogation and
reimbursement interests that Aetna has assigned to it, and the Settlement
Agreement does not preclude the recovery of those interests.
IV. CONCLUSION
For the foregoing reasons, we REVERSE the judgment of the district
court in favor of Dawson and REMAND for further proceedings consistent with
this opinion.
2Aetna first requested payment from Dawson in January 7, 2011, by sending him a
demand letter.
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