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Capanna v. MOBIL Oil Corp.

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT


March 11, 1985

JOHN CAPANNA
v.
MOBIL OIL CORPORATION, A CORPORATION AUTHORIZED TO DO BUSINESS IN NEW JERSEY, AND FENIX INDUSTRIAL SERVICES, A CORPORATION AUTHORIZED TO DO BUSINESS IN NEW JERSEY, JOINTLY, SEVERALLY, AND IN THE ALTERNATIVE AND MOBIL OIL CORPORATION, THIRD PARTY PLAINTIFF V. FENIX INDUSTRIAL SERVICES, INC., THIRD PARTY DEFENDANT, (D.C. CIVIL NO. 79-3393) PHILIP JUHRING, JR. V. MOBIL OIL CORPORATION, A CORPORATION AUTHORIZED TO DO BUSINESS IN NEW JERSEY, DEFENDANT AND MOBIL OIL CORPORATION, A NEW YORK CORPORATION, THIRD PARTY PLAINTIFF V. FENIX INDUSTRIAL SERVICES, INC., A NEW JERSEY CORPORATION, (D.C. CIVIL NO. 79-3596) MOBIL OIL CORPORATION, APPELLANT

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)

Author: Rosenn

Before GARTH, BECKER, and ROSENN, Circuit Judges

MEMORANDUM OPINION OF THE COURT

ROSENN, Circuit Judge

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.

I.

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.

See Appendix at 16.

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 responsible for payment of plaintiffs' attorneys' fees.

Without reference to the alleged oral agreement, the district court ultimately decided the case in favor of the plaintiffs. The court held that, as a matter of law, the form of the written settlement obligated Mobil to pay plaintiffs' attorneys' fees pursuant to N.J.S.A. 34:15-40(b).

II.

In this case, Fenix paid plaintiffs $402,278.59 in workers' compensation benefits. Plaintiffs then negotiated a settlement many times in excess of the compensation benefits due from Mobil. At that time, plaintiffs became obligated to reimburse Fenix in the amount of benefits paid ($402,278.59), less their counsel fees and costs (later determined to be $82,062). Fenix's lien, then, would apparently be in the amount of $320,216.59.

Mobil agreed, as part of its settlement with Capanna and Juhring, to pay the plaintiffs' lien obligations to Fenix. The only question in this appeal is what the parties saw as the relevant obligation of Mobil to pay attorneys' fees. If the parties understood the obligation to be the pre-setoff figure of $402,278.59, then it would clearly seem to require that Mobil remit $82,062 to plaintiffs as payment for their attorneys' fees. If the parties saw the obligation as consisting of only $320,216.59, however, then plaintiffs would be obligated to look to their overall settlement with Mobil for their attorney's fees.

The district court's resolution of this case rested on its finding that N.J.S.A. 34:15-40 requires a party who has undertaken to satisfy a "workers' compensation lien also to pay attorney's fees." The court stated that "by standing in plaintiffs' shoes and taking responsibility for paying off the workmen's compensation lien, Mobil Oil obligated itself to pay the attorneys' fees on the workmen's compensation lien."

This focus on the question of what is encompassed by the notion "workers' compensation lien" seems inappropriate. The district court's position that, as a matter of law, an agreement to pay a "workers' compensation lien" necessarily also entails the obligation to pay attorney's fees is not supported by the statute. Moreover, this position is seemingly contradicted later in the district court's opinion when the court notes that "workmen's compensation liens" and attorney's fees are defined by the statute to be mutually exclusive.

Instead of focusing on the phrase "workmen's compensation lien," a more realistic approach would be to attempt to understand the parties' agreements. These were very large settlements involving millions of dollars. They were of utmost importance to the plaintiffs and their counsel; of less significance, they nonetheless had important consequences for the defendants and their insurance carriers. Each of the parties was represented by experienced counsel and according to plaintiff's counsel Stanley B. Gruber's affidavit of March 1, 1983, a settlement agreement was reached in court "following the selection of a jury in this matter and intense settlement negotiations."

The general release executed and acknowledged by Capanna on March 14, 1983, and witnessed by his counsel, James Driscoll, has a three-page typewritten addendum which spells out with considerable detail and specificity Mobil's obligations under the settlement. In addition to the initial payment of $2,000,000 payable by check to Capanna and his attorneys, Messrs. Tomasello and Driscoll, it provided for annual payments to plaintiff or his estate of $150,000 for life guaranteed by a policy of insurance with Alexander Hamilton Life Insurance Co. The addendum further provides that should Capanna die before February 1, 2013, the balance of thirty annual payments unpaid at the time of plaintiff's death shall be paid in annual installments to his estate. These payments are to be guaranteed by the insurance company. It also provided for quinquennial payments commencing with $100,000 on February 1, 1988, and with additional increments of $100,000 with each payment culminating with a $600,000 payment on February 1, 2013.

Finally, the addendum provided for the payment within seven days after receipt of the releases to Firemen's Insurance Company as the carrier of the workers' compensation insurance for Fenix of a specific sum as against the compensation benefits paid by it "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 Co. in satisfaction of that company's Workers Compensation lien against sums paid plaintiff in settlement of this claim." Except for the amount of the initial payment of $1,000,000 and smaller payments thereafter, the release and addendum executed by plaintiff Juhring paralleled Capanna's release, including the specific language pertaining to the repayment of the workmen's compensation benefits paid by the Fenix carrier. The signature to this release appears to be witnessed by his counsel, Gruber. Each release specifically provides for repayment of the benefits less attorney's fees. No provision is made for the payment of attorney's fees to the plaintiffs for the obvious reason that plaintiffs were permitted to retain $82,062 out of the workers' compensation benefits paid to them.

In light of the "intense settlement negotiations" and the painstaking provision for Mobil's obligations, there is no reason to believe that any attorney's fees due plaintiffs were overlooked or that they were subject to any oral agreement. There is no uncertainty in the language of the agreements or in this record that would in the slightest degree indicate Mobil also assumed an obligation to pay any counsel fees to the plaintiffs.*fn3 Mobil did not agree to pay the entire $402,278 in benefits previously paid by the carrier. It agreed to pay only the sum that the plaintiffs themselves would have been required to pay to satisfy Fireman's lien of $320,216.59. The remaining $82,062 representing counsel fees and costs remained with the plaintiff.

No authority in New Jersey's Workers' Compensation Act or in case law has been brought to our attention, nor do we find any, that requires Mobil to pay plaintiffs' counsel fees under the terms of these settlements. Nothing in N.J.S.A. 34:15-40 requires a third party to pay employees' attorney's fees merely because it agrees to satisfy their workers' compensation lien. We agree with the defendant Mobil that to do so in the circumstances of this case would provide plaintiffs with a double recovery of attorney's fees, once from Fenix and again from Mobil.

III.

For the reasons set forth above, the order of the district court will be reversed.


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