Opinion
DOCKET NO. A-4731-13T1
07-09-2015
INAAM ELHELOU, Plaintiff-Appellant, and CVS PHARMACY, INC., and GALLAGHER BASSETT SERVICES, Plaintiffs-Respondents, v. LIPINSKI OUTDOOR SERVICES, LIPINSKI LANDSCAPING & IRRIGATION, INC., Defendants/Third-Party Plaintiffs-Respondents, v. ALL STATE POWER WASH, Third-Party Defendant-Respondent.
Robert A. Morley argued the cause for the appellant (Shebell & Shebell, LLC, attorneys; Mr. Morley, on the brief). Darryl S. Beckman argued the cause for respondents Lipinski Outdoor Services and Lipinski Landscape & Irrigation, Inc. (Beckman Ogozalek Perez Paglione, attorneys; Juan C. Perez, on the brief). M. Teresa Garcia argued the cause for respondents CVS Pharmacy, Inc., and Gallagher Bassett Services (Peter N. Laub, Jr., & Associates, L.L.C., attorneys; Mr. Laub, on the brief). John J. Delany, III, argued the cause for respondent All State Power Wash (Delany McBride, attorneys; Mr. Delany, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Alvarez, Waugh, and Maven. On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-314-12. Robert A. Morley argued the cause for the appellant (Shebell & Shebell, LLC, attorneys; Mr. Morley, on the brief). Darryl S. Beckman argued the cause for respondents Lipinski Outdoor Services and Lipinski Landscape & Irrigation, Inc. (Beckman Ogozalek Perez Paglione, attorneys; Juan C. Perez, on the brief). M. Teresa Garcia argued the cause for respondents CVS Pharmacy, Inc., and Gallagher Bassett Services (Peter N. Laub, Jr., & Associates, L.L.C., attorneys; Mr. Laub, on the brief). John J. Delany, III, argued the cause for respondent All State Power Wash (Delany McBride, attorneys; Mr. Delany, on the brief). PER CURIAM
Named-plaintiff Inaam Elhelou appeals the Law Division's May 16, 2014 order dismissing the complaint in this action with prejudice. We affirm.
I.
We discern the following facts and procedural history from the record on appeal.
In February 2010, Elhelou was the manager of a CVS store in Jamesburg. On the morning of February 7, he was injured when he slipped and fell while shoveling snow from a loading dock at the rear of the building. Elhelou retained Raymond Shebell, of Shebell & Shebell, LLC, to file a workers' compensation claim on his behalf. As a result of the claim, Elhelou received medical treatment and disability payments for injuries to his cervical, thoracic, and lumbar spine.
In a letter dated April 22, Peter N. Laub, Jr., who represented plaintiffs CVS Pharmacy, Inc. (CVS), and Gallagher Bassett Services (Gallagher), notified the Shebell firm that CVS's workers' compensation carrier was preserving its statutory lien with respect to any third-party personal injury claim Elhelou might file seeking damages related to the same incident. Laub requested that the Shebell firm keep him advised of the status of any such third-party action.
The exact relationship between CVS and Gallagher is unclear from the record. It appears from the complaint that CVS was self-insured for workers' compensation claims and retained Gallagher as a third-party workers' compensation administrator.
N.J.S.A. 34:15-40 (Section 40).
In a letter dated February 16, 2011, Gallagher advised Elhelou that, in its opinion, his injuries "may have been caused by the negligence of a third party." The letter outlined the relative rights of the parties as follows:
Under the State of New Jersey Workers' Compensation Law, you must either settle with the third party or his insurance carrier, or start proceedings for such recovery within 10 days of the date of this letter. If you do not, we have the right to do so and you will then be barred from bringing any further action against the negligent third party. By taking this action, we do not represent your interests
and are not obligated to seek an amount in excess of what we have paid on your behalf.
If you have any questions regarding this, you may consult an attorney of your own choice, however, please note that if you decide to do so, you will be responsible for the payment of any attorney fee or related costs resulting from such consultation.
Please advise us if you intend to start proceedings against the negligent third party. If we do not hear from you within 10 days, we may initiate the appropriate proceedings to seek recovery of payments made.
[(Emphasis added).]
On March 1, Shebell wrote to Laub, forwarding a copy of Gallagher's letter and instructing him that Gallagher was not to contact his client directly. Shebell stated that he would "take the necessary action for their conduct" if Gallagher did so again. Shebell did not state, one way or another, whether Elhelou had pursued, or intended to pursue, a third-party claim.
On December 1, Gallagher sent a letter to the insurance carrier for defendants Lipinski Outdoor Services and Lipinski Landscaping & Irrigation, Inc. (Lipinski defendants), who were responsible for the snow removal at the Jamesburg CVS. The letter included the following:
Please accept this letter as notice of [an] injury. It is hereby claimed that this accident was caused by negligence. We hereby notify you of our lien against any settlement you may make with [Elhelou] as
provided under N.J.S.A. 34:15-40 of Workers['] Compensation Law.
As the compensation carrier of CVS, we have a lien on any settlement or recovery. Please be advised that our lien to date is $90,630.87. We have paid $21,097.72 in indemnity and $69,533.15 in medical expenses.
Kindly inform us of the status of the third[-]party action. I greatly appreciate your prompt response in this matter and look forward to working with you.
On December 9, Laub wrote Shebell, attaching a copy of his April 22, 2010 letter and asking for confirmation that Elhelou did not intend to file a third-party claim. Laub received no response to his inquiry.
On January 23, 2012, Laub filed a complaint against the Lipinski defendants. The named plaintiffs were listed as Elhelou, CVS, and Gallagher, and Laub's firm was listed as their attorney. The complaint referred to the payment of workers' compensation benefits by CVS through Gallagher and existence of the Section 40 lien. It demanded that "all of the recovery in the action be applied first towards reimbursement" of the compensation benefits.
The complaint also named fictitious individual and corporate defendants.
On March 28, the Lipinski defendants filed an answer. They subsequently filed a third-party complaint against All State Power Wash (All State), alleging that "[it] was contractually responsible for snow clearing and ice treatment at the premises where [Elhelou] claims to have injured himself." All State answered the third-party complaint.
The answer asserted that the correct name for the defendant was Lipinski Snow Services, Inc.
On April 12, Gallagher sent a letter directly to Elhelou attaching interrogatories and requesting that he answer them and return the responses. On July 10, Laub sent a letter to Shebell repeating Gallagher's request that his client answer the interrogatories and return the responses. Elhelou complied with the request through Shebell.
On January 24, 2013, the attorneys for the Lipinski defendants sent a letter to Laub requesting that Elhelou appear for an independent medical examination (IME) on February 14. On the same date, Laub sent a letter to Shebell conveying the following information:
We have filed a [t]hird[-p]arty [s]ubrogation claim on behalf of the workers['] compensation carrier to recover the compensation lien under Sec[tion] 40. To properly prosecute the subrogation claim we will require the cooperation of Mr. Elhelou for the deposition scheduled by defendants['] counsel on February 26, 2013.Laub sent a follow-up letter on February 7, reiterating his request and adding the following: "Please provide the authorization so we may contact Mr. Elhelou or please contact him to advise of the obligation to cooperate with regards to the processing of the [t]hird[-p]arty subrogation case and his participation in discovery necessary for the subrogation claim."
We also have [] received an[] IME notice from defendants['] counsel. Considering that there is a pending workers['] compensation claim[,] we need your authorization to contact Mr. Elhelou directly for [the] purpose of his compliance [with] discovery.
On February 11, Laub sent the following letter directly to Elhelou:
Although not clear from the record, it appears that Shebell consented to direct communication for such purposes.
This office represents CVS and Gallagher Bassett in the [t]hird[-p]arty subrogation complaint that has been filed against the landscaping company that was responsible for the snow clearing, salting[,] and maintenance of the property. The purpose of this lawsuit is to seek recovery, under Section 40 of the statute, of the workers['] compensation benefits paid. In order to effectively prosecute the lawsuit, GBS and CVS require your cooperation and participation in pre-trial discovery including depositions and medical examinations. In that regard, the defendant/landscaping company has served notice for the scheduling of your deposition on February 15, 2013 at 11:00am at our office in Branchburg, New Jersey. Also, theElhelou appeared for the deposition as scheduled, but the IME was never completed because the physician was unwilling to examine Elhelou prior to his scheduled surgery. By the end of February, the lien amount had increased to $105,129.45.
defendant has scheduled an independent medical exam for you . . . on February 14, 2013 at 3pm.
On May 9, Laub sent Elhelou a letter advising him that the matter was scheduled for an arbitration hearing on May 23, at which his appearance and testimony were necessary. Elhelou appeared for and testified at the arbitration. The arbitration resulted in a non-binding award in the amount of $105,129.45.
On June 7, Laub sent a letter to Elhelou advising him that the matter was scheduled for trial on August 26, at which his appearance and testimony were necessary. On August 26, Laub sent a letter to counsel for Lipinski and All State confirming the outcome of settlement discussions. The letter read, in its entirety, as follows:
This will confirm recent discussions regarding settlement of the above matter[,] in which plaintiff, CVS, as subrogee of Inaam Elhelou on its Section 40 workers['] compensation lien, has agreed to accept a total payment of $93,500[,] which shall be apportioned with a contribution of $73,500.00 on behalf of Lipinski Outdoor Services for a release of the direct claim and a contribution of $20,000 from All Sta[te] Power Wash for release of [the] third[-]party claim from Lipinski. We will
forward a [r]elease to Lipinsk[i] for the full payment of $93,500 with [a s]tipulation of [d]ismissal as to the direct claim and request that a [r]elease and stipulation of dismissal as to the third[-]party claim be prepared by Lipinski to All Sta[te] Power Wash.
On September 5, Laub sent a letter directly to Elhelou requesting that he sign and return a release of his claims against the Lipinski defendants and All State. On October 8, Robert A. Morley of the Shebell firm wrote to Laub, advising him that Elhelou sought the firm's advice concerning whether he should execute the release and that the firm was representing Elhelou with respect to that issue. Morley explained that the firm advised Elhelou not to execute the release until the firm reviewed the litigation file. He requested that Laub forward the full litigation file so that the firm could "properly advise [Elhelou] whether he should release his rights to a personal injury recovery." Morley also asked for documentation of the basis for and allocation of the settlement proceeds.
On October 10, Laub responded by faxing a copy of the complaint and the February 16, 2011 letter from Gallagher to Elhelou. On November 1, Laub sent the following letter to Morley:
Regarding the execution of the [r]elease on the third[-]party subrogation complaint filed under Section 40 of the [c]ompensation [s]tatute, in order to avoid the necessityOn November 5, Morley responded to Laub by repeating his request for the entire file.
of the filing of an OTSC, please have Mr. Elhelou sign and forward to our office so that we may serve on the third[-]party defendants and obtain the settlement proceeds.
In March 2014, Laub filed a motion to compel Elhelou, as subrogor, to sign the release or, in the alternative, for an order declaring that Elhelou's release was not required. Elhelou filed a cross-motion seeking the following relief: (1) permitting the Shebell firm to appear in the action, (2) denying the relief requested by CVS and Gallagher, (3) disqualifying Laub's firm, (4) substituting Shebell as counsel, and (5) compelling the turnover of the file in the subrogation action.
The motion judge heard oral argument on May 9. The attorney from Laub's firm advised the judge that the parties had settled the matter for $93,500. The settlement represented a significant compromise of the Section 40 lien, which was then in excess of $198,000. Morley advised the judge that the Shebell firm had no interest in taking the case, but decided to become involved because they were concerned that Elhelou's rights in the personal injury action were not being considered.
The Lipinski defendants' attorney represented that his firm had initially been defending the action as if it were a personal injury case, rather than just a subrogation case. However, he told the judge that "[t]here was clarification issued by [c]ounsel, Mr. Laub's office, that, 'No, you don't have to worry about the personal injury aspect of this. You can stop your deposition [of Elhelou] where you are. You don't have to go forward.'" At the conclusion of argument, the judge reserved his decision.
On May 16, the judge issued an order dismissing the complaint with prejudice. He explained his decision in an accompanying written opinion. The judge described the case as a "subrogation action" under N.J.S.A. 34:15-40(f). After summarizing the salient facts and noting the Shebell firm's acquiescence in Laub's handling of the subrogation case, the judge concluded that there was "no attorney[-]client relationship" between Laub and Elhelou, and also no obligation on Laub's part to do "anything more than perfect and satisfy the [S]ection 40 lien rights of his client, CVS, that arose under N.J.S.A. 34:15-40."
The judge held that N.J.S.A. 34:15-40(f) permitted the subrogation action and provided that settlement of the action barred further proceedings by Elhelou. The fact that Elhelou was entitled to any excess settlement amount under the statute "[did] not create an obligation on the part of the subrogee to seek a settlement or judgment in excess of their lien claim." The judge concluded that, in the absence of "fraud" or other "compelling circumstances," there was no "legal or factual basis to disturb the settlement by and between the parties" to the litigation. This appeal followed.
II.
On appeal, Elhelou argues that the motion judge erred in holding that (1) he waived his right to personal-injury damages by failing to commence his own action after receiving the ten-day notice letter from Gallagher; (2) there was no attorney-client relationship between Laub and Elhelou; and (3) the settlement was valid despite the fact that Laub never notified Elhelou or sought his consent to the settlement.
In deciding a motion to enforce settlement, the trial judge applies the same standard as that for a motion for summary judgment. Amatuzzo v. Kozmiuk, 305 N.J. Super. 469, 474-75 (App. Div. 1997). We review a grant of summary judgment under the same standard. Rowe v. Mazel Thirty, LLC, 209 N.J. 35, 41 (2012). We must determine whether there are any genuine issues of material fact when the evidence is viewed in the light most favorable to the non-moving party. Id. at 38, 41. The legal conclusions undergirding the decision are reviewed "on a plenary de novo basis." Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 385 (2010).
An appellate court reviews a question of statutory interpretation de novo. Maeker v. Ross, 219 N.J. 565, 574-75 (2014). The Supreme Court in DiProspero v. Penn, 183 N.J. 477, 492-93 (2005) (alteration in original) (citations and internal quotation marks omitted), described the process as follows:
The Legislature's intent is the paramount goal when interpreting a statute and, generally, the best indicator of that intent is the statutory language. We ascribe to the statutory words their ordinary meaning and significance and read them in context with related provisions so as to give sense to the legislation as a whole. It is not the function of this Court to rewrite a plainly-written enactment of the Legislature []or presume that the Legislature intended something other than that expressed by way of the plain language. We cannot write in an additional qualification which the Legislature pointedly omitted in drafting its own enactment or engage in conjecture or surmise which will circumvent the plain meaning of the act. Our duty is to construe and apply the statute as enacted.
A court should not resort to extrinsic interpretative aids when the statutory language is clear and unambiguous, and susceptible to only one interpretation.
"It is one of the cardinal rules of statutory construction that legislation should be so construed that, if possible, full force and effect shall be given to every sentence, clause and word thereof." Oldfield v. N.J. Realty Co., 1 N.J. 63, 68 (1948). In addition, "when the language of a statute is clear on its face, the sole function of the courts is to enforce it according to its terms." Hubbard v. Reed, 168 N.J. 387, 392 (2001) (internal quotation marks omitted). Courts are "without power to include a provision that the Legislature omitted." Klumb v. Bd. of Educ. of Manalapan-Englishtown Reg'l High Sch. Dist., 199 N.J. 14, 34 (2009).
Our courts have interpreted N.J.S.A. 34:15-40(f) to confer a statutory right of subrogation on the employer and the carrier. Schweizer v. Elox Div. of Colt Indus., 70 N.J. 280, 284 (1976); U.S. Cas. Co. v. Hercules Powder Co., 4 N.J. 157, 166 (1950); Multiplex Concrete Co. v. Besser Co., 153 N.J. Super. 531, 534 (App. Div. 1977 ), certif. denied, 75 N.J. 607 (1978); Roberts v. All Am. Eng'g Co., 104 N.J. Super. 1, 8 (App. Div. 1968); Feeley v. Port of N.Y. Auth., 53 N.J. Super. 233, 235-36 (Law Div. 1958); Prudential Ins. Co. of Am. v. Laval, 131 N.J. Eg. 23, 26 (Ch. 1942) ("[The] right to reimbursement from [a] third[-]party recovery is derived from what may be termed the employer's or his insurance carrier's 'statutory subrogation.'").
"Subrogation is the substitution of one person in the place of another with reference to a lawful claim, demand or right, so that he who is substituted succeeds to the rights of the other in relation to the debt or claim, and its rights, remedies or securities." Feigenbaum v. Guaracini, 402 N.J. Super. 7, 19 (App. Div. 2008) (alteration, citations, and internal quotation marks omitted). In addition, "[s]ubrogation rights may be created in three different ways: (1) by agreement; (2) by statute; or (3) judicially as an equitable device to compel the ultimate discharge of an obligation by the one who should in good conscience pay it." Id. at 20 (citations and internal quotation marks omitted). Significantly, "[a]ll subrogation rights contemplate a mere succession to another's rights to recover; the fact that that other cannot recover is simply an incident of the right." Sanner v. Gov't Emps. Ins. Co., 150 N.J. Super. 488, 495 n.2 (App. Div. 1977 ), aff'd o.b., 75 N.J. 460 (1978). Thus, to the extent that N.J.S.A. 34:15-40(f) grants an employer or compensation carrier a right of statutory subrogation, it cuts off the employee's right to participate in settlement or file a lawsuit, and limits the employee's right of recovery to the excess of the compensation lien.
N.J.S.A. 34:15-40 preserves the right of the injured employee to pursue a claim against a responsible third party.
Where a third person is liable to the employee . . . for an injury or death, the existence of a right of compensation from the employer or insurance carrier under this statute shall not operate as a bar to the action of the employee . . . , nor be
regarded as establishing a measure of damage therein. In the event that the employee . . . shall recover and be paid from the said third person or his insurance carrier, any sum in release or in judgment on account of his or its liability to the injured employee . . . , the liability of the employer under this statute thereupon shall be only such as is hereinafter in this section provided.
[Ibid.]
N.J.S.A. 34:15-40(f) sets out the rights of an employee, employer, and the employer's workers' compensation carrier to recover from a third party responsible for injuries for which an employee has been compensated through workers' compensation. This includes the right of an employer or workers' compensation insurance carrier to settle with the third party or its insurance carrier, or to bring an action to recover personal injury damages from a third party when the employee fails to do so.
If the injured employee has instituted an action against a third party and the action is dismissed for lack of prosecution, the employer or insurance carrier "shall . . . be entitled to have such dismissal set aside, and to continue the prosecution of such proceedings in the name of the injured employee," as long as an application to do so is made within ninety days of the dismissal. N.J.S.A. 34:15-40(f). --------
When an injured employee . . . fail[s] within 1 year of the accident to either effect a settlement with the third person or his insurance carrier or institute proceedings for recovery of damages for his
injuries and loss against the third person, the employer or his insurance carrier, 10 days after a written demand on the injured employee . . . , can either effect a settlement with the third person or his insurance carrier or institute proceedings against the third person for the recovery of damages for the injuries and loss sustained by such injured employee.
[Ibid.]
If the employer or carrier elects to file suit, "such right of action shall be only for such right of action that the injured employee . . . would have had against the third person." Ibid. In other words, the employer or carrier is subrogated to the employee's rights, which are the only claims it can make against the third party. Further, the employer or carrier's action "shall constitute a bar to any further claim or action by the injured employee . . . against the third person." Ibid. Any action "shall be . . . in the name of the injured employee or by the employer or insurance carrier in the name of the employee to the use of the employer or insurance carrier." Ibid.
Subsection (f) also governs the allocation of the proceeds of a settlement or judgment against the third party obtained by the employer or insurance carrier. Significantly for the purposes of this appeal, the statutory language speaks in terms of "a settlement . . . between the employer or his insurance carrier and the third person or his insurance carrier, or a judgment . . . recovered by the employer or his insurance carrier against the third person for the injuries and loss sustained by the employee." Ibid. If the amount recovered "is in excess of the employer's obligation to the employee . . . and the expense of suit, such excess shall be paid to the employee." Ibid.
We find no support for Elhelou's appellate arguments in the text of the statute, nor do we find any ambiguity. First, after the employee has failed to file his or her own third-party action within one year of the compensable accident and has been given the ten-day notice, the employer or compensation carrier has the right to enter into a settlement with the third party without commencing litigation. Even though the statute requires no notice of the settlement to the employee, its consummation acts as "a bar to any further claim or action by the injured employee." Ibid. Similarly, the statute does not require that the employee be given notice of a suit brought by the employer or its carrier. The only notice required by the statute is the ten-day notice of the employer or carrier's right to bring such suit, which must be given prior to the filing of the complaint. There are no notice requirements after that point.
Second, the statute provides that the suit is to be brought "in the name of the injured employee or by the employer or insurance carrier in the name of the employee to the use of the employer or insurance carrier." Ibid. The suit is not brought by the employee directly. We note that, if an employee has brought and abandoned his or her own action, the statute allows the employer or carrier to reopen the action and prosecute it "in the name of the injured employee," rather than on behalf of the employee directly. Ibid.
Third, the statute speaks in terms of "a settlement . . . effected between the employer" or its carrier and the third party or its carrier, as well as a judgment "recovered by the employer" or its carrier. Ibid. In neither instance does the statute mention any right of the employee to participate in reaching a settlement, whether in lieu of litigation or to conclude litigation.
We also note that, in Beltatto v. Massachusetts Bonding & Insurance Co., 39 N.J. Super. 507, 511 (Ch. Div. 1956), the Chancery Division interpreted the statutory scheme found in N.J.S.A. 34:15-40(f) as providing no role for the compensation carrier in the settlement of an employee's direct action against a third party.
Neither by implication nor direct proviso does [the statute] confer upon the carrier
any authority or control over the common-law action, save in instances where the workman, having failed to bring the action within one year, fails also to bring it within ten days following the service upon him of written demand that he do so. The latter circumstance is not here involved.
[Beltatto, supra, 39 N.J. Super. at 511.]
Similarly, the judge in Beltatto observed that the situation in which the carrier has brought its own action, because the employee failed to bring one within a year and the carrier had given the required notice, is the "only circumstance[] in which the carrier may conclude a settlement on its own independent authority" under the statute. Ibid. The statutory scheme is clearly symmetrical: the employee controls his or her common-law suit without interference from the employer or its carrier, but once the employer or carrier is authorized to settle or bring suit against the third party, they control the litigation. In either case, the lien is protected because the proceeds of a settlement or judgement, after deduction of specific costs and expenses, are first available to satisfy the lien, after which any excess goes to the employee.
With respect to the relationship between Elhelou and Laub, there was no retainer agreement or any other indicia of an attorney-client relationship between them. Shebell initially informed Laub that Gallagher, Laub's client, was precluded from contacting Elhelou directly. In the letter, Shebell refers to Elhelou as "my client" twice.
Laub communicated with Elhelou through Shebell, both before and after the filing of the suit against the Lipinski defendants. On January 24 and February 7, 2013, Laub sought Shebell's permission to contact Elhelou directly with respect to discovery issues. Both letters clearly stated that Laub had filed "a [t]hird[-p]arty [s]ubrogation claim on behalf of the workers['] compensation carrier to recover the compensation lien." Although there is no correspondence in the record confirming that Shebell gave such consent, we note that Laub began writing directly to Elhelou on February 11, introducing himself as the attorney "represent[ing] CVS and Gallagher Basset in the [t]hird[-p]arty subrogation complaint."
Consequently, we conclude there is no statutory or factual basis for finding that there was an attorney-client relationship between Elhelou and Laub. In fact, the only attorney-client relationship involving Elhelou reflected in the record was with the Shebell firm.
III.
In summary, we hold that CVS and Gallagher had no obligation to inform Elhelou in advance of the settlement. Instead, they had the right to settle the subrogation action without Elhelou's consent. In addition, we find that there was no attorney-client relationship between Elhelou and Laub. Elhelou was represented by the Shebell firm in connection with the workers' compensation claim. Shebell received a copy of Gallagher's ten-day notice letter directly from Elhelou and had ample opportunity to advise Elhelou concerning his options under N.J.S.A. 34:15-40(f). Those options included his right to bring his own third-party action directly rather than allowing CVS and Gallagher to bring a subrogation action. The other option was to allow CVS and Gallagher to file suit in Elhelou's name, in which case he would be precluded from bringing his own action. Neither Shebell nor Elhelou took any steps to preclude CVS and Gallagher from filing their own subrogation action. Consequently, we affirm the order on appeal.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION