On Appeal from the United States District Court for the District of New Jersey (Camden) District Judge: Honorable John F. Gerry. (D.C. Civil No. 79-3393 and D.C. Civil No. 79-3596)
Before GARTH, BECKER, and ROSENN, Circuit Judges
MEMORANDUM OPINION OF THE COURT
This appeal arises out of comprehensive settlement agreements entered into between the plaintiffs, John Capanna and Philip Juhring, Jr., and their employer, Fenix Industrial Services, Inc. (Fenix), and Mobil Oil Corporation (Mobil) for whom Fenix was performing services at the time the plaintiffs sustained injuries, and the insurance carriers for both companies. Under the terms of the settlements, Mobil obligated itself to pay substantial sums to each plaintiff and to pay Fenix, plaintiffs' employer, an amount equal to the workmen's compensation liens arising out of payment of compensation benefits to the plaintiffs, less court costs and attorney's fees fixed by the court and chargeable against said amount as provided by law.
Sometime after the settlements had been consummated, the plaintiffs asserted that Mobil was obligated to pay them attorney's fees to the extent they were incurred in connection with repayment of their workmen's compensation claims, contending that Mobil had agreed to make such payment. On motion to enforce the settlements, the district court held that, given the form of the settlements, New jersey S.A. 34:15-40 required Mobil to pay plaintiffs' attorney's fees. Mobil appealed from this order of the district court.*fn1 We reverse.
On October 5, 1979, an explosion occurred at the Paulsboro, New Jersey, refinery of the defendant Mobil causing serious harm to plaintiffs John Capanna and Philip Juhring. At the time, plaintiffs were employed by third-party defendant Fenix Industrial Services, Inc. Fenix in turn was under contract to Mobil to perform certain services at the Paulsboro refinery, and plaintiffs were engaged in work for Fenix on the site when they sustained their injuries. AS part of the contract with Mobil, Fenix agreed to carry liability and workers' compensation insurance and to indemnify Mobil should Mobil become liable to any of Fenix's employees as the result of injuries for which Fenix was at least partially responsible.
In satisfaction of Fenix's obligations under the workers' compensation laws, Fenix's insurer paid benefits of $291,625.30 to Capanna and $110,613.20 to Juhring for a total of $402.238.50.
Plaintiffs then brought separate tort actions against Mobil, and Mobil in turn filed a third-party complaint against Fenix for indemnification under the contract between them. In January 1983, just before trial, plaintiffs settled their claims against Mobil. The settlements included cash payments of $2,000,000 to Capanna and $1,000,000 to Juhring, as well as substantial annuities to each. In addition, as part of the settlement, plaintiffs negotiated and received from Mobil an agreement that Mobil would satisfy the workers' compensation liens held against them by their employer's (i.e., Fenix's) insurer. This lien arose because, in New Jersey, when an employee who is eligible for workers' compensation benefits obtains recovery from a third-party tortfeasor, he must reimburse the employer for any benefits paid to him under the workers' compensation laws. See N.J.S.A. 34:15-40(d). The employee may, however, withhold a portion of this reimbursement, representing that part of the employee's attorney's fee which is proportionate to the reimbursement or the release of the employer from workers' compensation liability. N.J.S.A. 34:15-40(b).*fn2 With this in mind, the settlement agreements provide that Mobil
will pay to Firemen's Insurance Company as the carrier of Workers Compensation Insurance for Plaintiff's employer, Fenix Industrial Services, Inc., the sum of [$402,238.50] less the attorney's fee fixed by the court and chargeable against said amount as provided by law, payable by check from Mobil to Firemen's Insurance Company in satisfaction of that Company's Workers Compensation lien against sums paid Plaintiff in settlement of this action.
Some time later, Mobil settled its indemnification action against the employer. Pursuant to the settlement, the employer (Fenix) waived its right to reimbursement under N.J.S.A. 34:15-40 in exchange for Mobil's releasing certain claims against Fenix. Fenix understood, and the district court held, that this exchange did not include any consideration representing plaintiff's attorney's fees. That is, the legal effect of Mobil's settlement with Fenix was that Mobil reimbursed the employer for benefits previously paid, but it did not undertake to or pay the employer that portion of the reimbursement that represented plaintiffs' attorneys' fees and costs of suit.
The settlements were finalized on March 18, 1983. Plaintiffs claim that subsequently there was an oral agreement confirming what plaintiffs contend was already agreed to, i.e., that Mobil would be ...