Opinion
98 C 50413
December 17, 2003
MEMORANDUM OPINION AND ORDER
Third-party defendant, Northwestern Steel Wire (NSW), which is also a debtor in a pending Chapter 7 proceeding in bankruptcy court, has filed a stipulation to waive its workers' compensation lien "to the full extent that [it] has a right or interest in such a lien." Third-party plaintiff, Ryder Truck, has filed an objection to the stipulation, asserting that the bankruptcy trustee and the State of Illinois, who has become responsible for the continued payment of workers' compensation benefits to plaintiff's decedent's estate, are the only entities that have authority to waive any workers' compensation lien.
In a related motion to dismiss under Fed.R.Civ.P. 12(c), NSW seeks dismissal of third-party plaintiff, East Manufacturing's, complaint because under Illinois law NSW's liability is limited to the amount of the workers' compensation lien (see Kotecki v. Cyclops Welding Corp., 146 Ill.2d 155 (1991)) and NSW has stipulated to waiving its lien thereby eliminating any basis for recovery against it. East Manufacturing has objected to the motion to dismiss, contending that it is "unclear as to whether [NSW] even possesses any workers' compensation lien rights or possesses the requisite authority to waive any such purported lien rights" because of the bankruptcy proceeding and the fact that the State of Illinois has assumed responsibility to pay the workers' compensation obligation of NSW. East Manufacturing further argues that NSW cannot waive any lien because the amount of the lien has not yet been determined. East Manufacturing has also moved for leave to file a sur-reply brief in further opposition to NSW's motion to dismiss.
As an initial matter, the court grants East Manufacturing's motion for leave to file a sur-reply brief.
Under Rule 12(c), a party can move for judgment on the pleadings after the filing of both the complaint and the answer. Brunt v. Service Employees International Union, 284 F.3d 715, 718 (7th Cir. 2002). A court will grant a Rule 12(c) motion only when it appears beyond doubt that the plaintiff cannot prove any facts to support a claim forrelief and the moving party demonstrates that there are no material issues of fact to be resolved. Brunt, 284 F.3d at 718-19.
Under Illinois law, which applies to this diversity action, a third-party defendant-employer's liability is limited to the extent of its workers' compensation lien. Kotecki, 146 Il.2d at 165-66. By waiving its lien, the employer may avoid liability for contribution to other tortfeasors allegedly responsible for the worker's injury.LaFever v. Kemlite Co., 185 Ill.2d 380, 399 (1998).
Furthermore, under section 4a-6 of the Workers Compensation Act, the Self-Insurers Advisory Board (Board) "shall be a party in interest in all proceedings involving compensation claims against an insolvent self-insurer whose compensation obligations have been paid or assumed by the Board and shall have all rights of subrogation of the insolvent employer." 820 ILCS 305/4a-6(b) (West 2003). Additionally, the Board "shall assume and may exercise all rights and defenses of the insolvent self-insured" ( 820 ILCS 305/4a-6(b)) including the right to "receive notice of, investigate, adjust, compromise, settle and pay claims" ( 820 ILCS 305/4a-6(b)(2)). While there are no Illinois cases interpreting these provisions, the court reads them as giving the Board the right to a workers' compensation lien to the extent the Board has paid the obligation of NSW. The question of whether the Board can waive such a lien is not squarely before this court because the Board is not a party to this action.
NSW, however, is a third-party defendant here. To the extent that NSW paid a portion of its workers' compensation obligation prior to becoming insolvent and retains a lien in that regard, NSW would retain authority to waive that lien and avoid liability under the third party complaint for contribution.
This case is unique, however, in that NSW is a debtor hi a Chapter 7 bankruptcy proceeding. The trustee in that proceeding has been authorized to waive the workers' compensation lien here to the extent " he may have [such rights] to workers' compensation liens." The attorney for the trustee stated to this court at a status hearing on December 15, 2003, that the trustee agreed with NSW's decision to waive its lien in this proceeding and that it was the trustee that sought appointment of counsel that represents NSW here.
Under these circumstances, any lien that exists apart from one possessed by the Board has been effectively waived by NSW and the bankruptcy trustee. Thus, under Illinois law, there is no longer any basis for third-party liability in contribution against NSW. Therefore, the court dismisses NSW as a third-party defendant. This ruling necessarily also applies to the third-party contribution claim in Count I of Ryder Truck's third-party complaint against NSW notwithstanding the lack of a motion to dismiss in that regard.