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    Holbrook v. Andersen Corporation, 1st Cir. (1993)

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    a third-party Here, the court summarizes a US Court of Appeals case regarding whether the United States can recover medical costs it paid under the Dependent's Medical Care Act from the settlement proceeds of a personal injury lawsuit. The Holbrooks settled their lawsuit against Andersen for $725,000 relating to injuries their son sustained. The US claimed a right to $139,028 of the settlement under the Federal Medical Recovery Act. The court found that the Recovery Act only allows the US to recover from the third-party tortfeasor, not from funds already paid to the injured party. As Andersen's liability was never determined, the US could not recover from the settlement proceeds. The court ordered the remaining

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    Holbrook v. Andersen Corporation, 1st Cir. (1993)

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    a third-party Here, the court summarizes a US Court of Appeals case regarding whether the United States can recover medical costs it paid under the Dependent's Medical Care Act from the settlement proceeds of a personal injury lawsuit. The Holbrooks settled their lawsuit against Andersen for $725,000 relating to injuries their son sustained. The US claimed a right to $139,028 of the settlement under the Federal Medical Recovery Act. The court found that the Recovery Act only allows the US to recover from the third-party tortfeasor, not from funds already paid to the injured party. As Andersen's liability was never determined, the US could not recover from the settlement proceeds. The court ordered the remaining

    Original Description:

    Filed: 1993-07-02 Precedential Status: Precedential Docket: 92-1902

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    a third-party Here, the court summarizes a US Court of Appeals case regarding whether the United States can recover medical costs it paid under the Dependent's Medical Care Act from the settlement proceeds of a personal injury lawsuit. The Holbrooks settled their lawsuit against Andersen for $725,000 relating to injuries their son sustained. The US claimed a right to $139,028 of the settlement under the Federal Medical Recovery Act. The court found that the Recovery Act only allows the US to recover from the third-party tortfeasor, not from funds already paid to the injured party. As Andersen's liability was never determined, the US could not recover from the settlement proceeds. The court ordered the remaining

    Copyright:

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    Holbrook v. Andersen Corporation, 1st Cir. (1993)

    Uploaded by

    Scribd Government Docs
    a third-party Here, the court summarizes a US Court of Appeals case regarding whether the United States can recover medical costs it paid under the Dependent's Medical Care Act from the settlement proceeds of a personal injury lawsuit. The Holbrooks settled their lawsuit against Andersen for $725,000 relating to injuries their son sustained. The US claimed a right to $139,028 of the settlement under the Federal Medical Recovery Act. The court found that the Recovery Act only allows the US to recover from the third-party tortfeasor, not from funds already paid to the injured party. As Andersen's liability was never determined, the US could not recover from the settlement proceeds. The court ordered the remaining

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    of 14

    USCA1 Opinion

    UNITED STATES COURT OF APPEALS


    UNITED STATES COURT OF APPEALS
    FOR THE FIRST CIRCUIT
    FOR THE FIRST CIRCUIT
    ____________________
    No. 92-1902
    MARY A. HOLBROOK, MARY E. HOLBROOK,
    INDIVIDUALLY AND AS MOTHER AND
    NEXT FRIEND OF DANIEL M. HOLBROOK,
    Plaintiffs, Appellants,
    v.
    ANDERSEN CORPORATION, ET AL.,
    Defendants, Appellees.
    ____________________
    APPEAL FROM THE UNITED STATES DISTRICT COURT
    FOR THE DISTRICT OF MAINE
    [Hon. Gene Carter, U.S. District Judge]
    ___________________
    ____________________
    Before
    Boudin, Circuit Judge,
    _____________
    Campbell, Senior Circuit Judge,
    ____________________
    and Stahl, Circuit Judge.
    _____________
    ____________________

    James M. Campbell with whom Michelle I. Schaffer, Ronald


    __________________
    _____________________
    _______
    Davids and Campbell & Associates were on brief for appellants.
    ______
    _____________________
    Margaret D. McGaughey, Assistant United States Attorney, w
    _______________________
    whom Richard S. Cohen, United States Attorney, and Paula D. Sils
    ________________
    _____________
    Senior Litigation Counsel, were on brief for appellees.
    ____________________
    June 30, 1993
    ____________________

    BOUDIN, Circuit Judge.


    _____________

    The Holbrooks'

    two-and-a-half-

    year-old son, Daniel Holbrook, sustained severe and permanent


    injuries after
    Holbrooks'
    employed

    falling through a second-floor

    apartment.
    by

    the

    Because plaintiff Mark

    United States

    accident, the United States

    Navy

    at

    the

    window of the
    Holbrook was
    time of

    paid 80 percent of the

    the

    costs of

    Daniel's medical treatment under the Dependent's Medical Care


    Act,

    10 U.S.C.

    then

    sued

    1071 (the "Dependent's Act").

    Andersen

    Corporation,

    the

    The Holbooks

    manufacturer of

    the

    window and screen, alleging negligence and product liability.


    The Holbrooks notified the United States of the initiation of
    the suit, but the United States did not intervene.
    Three

    days before

    settled the suit


    than

    trial,

    for $725,000.1

    the complaint

    had

    the

    Holbrooks and

    This amount

    sought, and

    was far

    the amount

    reflected the parties' judgment about likelihood


    Daniel Holbrook

    had

    been unsupervised

    accident, and there were no witnesses.


    not

    party

    to

    the

    agreement provide that

    settlement, nor

    Andersen

    at the

    less

    presumably
    of success;
    time of

    the

    The United States was


    did

    the

    any money should be paid

    settlement
    by Andersen

    to the United States in respect of the medical costs that the


    government

    had

    incurred.

    The

    settlement

    agreement

    did

    ____________________
    1Attorneys' fees and expenses absorbed a large portion
    of this amount ($391,505.50). Of the balance, the Holbrooks
    were allotted a portion ($50,000) for direct expenses with
    the remainder to be held in trust for Daniel.
    -2-2-

    provide, however, that the Holbrooks would indemnify Andersen

    if the latter were held liable to the United States.


    In
    court

    its order

    approving

    sua sponte
    ___ ______

    ordered

    proceeds be placed in an

    the settlement,

    that $139,028

    the

    of the

    district
    settlement

    escrow account to satisfy potential

    liens of the United States or others.2

    Six months later the

    United States moved to compel disbursement to it of the funds


    held

    in escrow,

    formally
    opposed

    and

    moved to

    shortly thereafter

    intervene

    both motions.

    motions and after a


    payments

    ordered

    $122,834.

    The

    Holbrooks.

    in the

    The court

    the United

    action; the

    States

    Holbrooks

    ultimately granted

    both

    recalculation of the government's actual


    disbursement

    balance of
    The

    to

    the

    the escrow

    Holbrooks

    United

    States

    was remitted

    appeal,

    arguing

    of

    to the

    that

    this

    disbursement was not authorized by law.


    In

    claiming

    settlement, the
    Medical Care
    Act").

    This

    a right

    to

    a portion

    United States

    the Holbrooks'

    relies solely on

    Recovery Act, 42
    statute grants

    of

    U.S.C.
    to the

    2651

    the Federal

    ("the Recovery

    government a

    right to

    recover from a third-party tortfeasor the reasonable value of


    medical services that the

    government has furnished under the

    ____________________
    2Local rules required court approval of settlements of
    claims brought on behalf of minor children.
    The court's
    escrow order may have been prompted by the Holbrooks'
    statement in
    their motion for court
    approval of the
    settlement that the Navy had paid 80 percent of the medical
    bills and that the total medical expenses amounted to
    $139,028.
    -3-

    -3-

    Dependent's

    Act

    (or

    under

    other

    similar

    statutes).

    Specifically, the Recovery Act provides:


    In any action in which the United States is
    authorized or required by law to furnish hospital,
    medical, surgical, or dental care and treatment . .
    . to a person who is injured or suffers a disease,
    after the
    effective date of this Act, under
    circumstances creating a tort liability upon some
    third person . . . to pay damages therefor, the
    United States shall have a right to recover from
    said third person the reasonable value of the care
    and treatment so furnished or to be furnished and
    shall, as to this right be subrogated to any right
    or claim that the injured person . . . has against
    such third person to the extent of the reasonable
    value of the care and treatment so furnished or to
    be furnished.
    42

    U.S.C.

    for the

    2651(a).

    The statute then sets forth procedures

    government's enforcement of this

    The United States

    may "intervene

    proceeding brought by the injured


    such an

    action

    is

    not

    right of recovery.

    or join in

    any action

    or diseased person" or, if

    commenced within

    six

    months,

    "institute and prosecute legal proceedings against


    person

    who

    is liable

    for the

    or

    injury or

    may

    the third

    disease."

    Id.
    __

    2651(b).
    The parties direct their

    arguments in this case chiefly

    at the procedural component

    of the statute, section 2651(b).

    The

    the

    Holbrooks

    argue

    that

    United

    States'

    motion

    to

    intervene came too late, because it was not filed until after
    the

    Holbrooks'

    settlement.
    law

    suit

    against

    Andersen

    The United States responds

    providing

    that

    the

    was

    resolved

    by

    by pointing to case

    procedural devices

    set

    forth

    in

    a motion

    to

    after entry

    of

    -4-4-

    section

    2651(b)

    intervene may be
    judgment.

    are

    not exclusive

    filed "at

    that

    any time," even

    United States v. Merrigan, 389 F.2d


    ___________________________

    Cir. 1968); see


    ___

    also United States v. York,


    ____ ______________________

    585-86 (6th Cir. 1968).


    not

    and

    We

    21, 25

    398 F.2d

    think that the crucial issue

    (3d
    582,
    is

    when the government may intervene but rather whom it may


    ____
    ____

    proceed against once it makes an appearance in the case.


    The statute

    grants

    recover "from [the] third


    the injury.

    It

    to the

    United

    States a

    person" who is liable in

    makes no provision for the

    right

    to

    tort for

    United States to

    recover

    against

    the

    injured

    unconditionally paid to the


    Moreover,
    statute

    the

    liability

    upon some

    right

    to

    upon "circumstances
    third

    Thomas v. Shelton,
    ___________________

    or

    740

    from

    funds

    injured party by the tortfeasor.

    United States'

    is contingent

    party

    party."
    F.2d

    478,

    recover under

    the

    creating a

    tort

    42

    U.S.C.

    481

    (7th

    2651(a);
    Cir.

    1984)

    (tortfeasors' "liability under the Medical Care Recovery


    depends on their being found liable

    Act

    . . . under the tort law

    of the pertinent state"); United States v. Trammel, 899 F.2d


    _________________________
    1483,

    1488 (6th Cir.

    1990) (same).

    There

    has been no such

    determination in this case.


    "All
    agreed

    courts

    that

    the

    which have
    statute

    considered
    gives

    the

    the

    question have

    United

    States

    an

    independent right of recovery against the tortfeasor . . . ."


    United States v. Housing Authority of Bremerton,
    __________________________________________________

    415 F.2d

    -5-5-

    239, 241 (9th Cir 1969).

    Thus, the government's right is not

    extinguished

    by the injured

    with the tortfeasor.


    674 F. Supp. 395
    right against
    defeated
    injured
    for

    See,
    ___

    person's settlement and release


    e.g., United States v. Theriaque,
    ____ __________________________

    (D. Mass. 1987).

    Indeed,

    the tortfeasor under

    even by

    certain

    United

    States

    the Recovery Act

    restrictions that

    person's own recovery.3

    the

    the government's

    to

    is not

    might bar

    the

    There is thus no necessity

    look

    to

    the

    injured

    party's

    settlement for compensation.


    If the United States
    to recover its medical
    under

    the plain

    against

    Andersen

    liability.

    language
    and

    of the

    seek

    to

    tortfeasor.

    Nor

    absent

    statute
    establish

    between

    is there any case


    an express

    proceed

    Andersen's

    tort

    not authorize

    the Recovery Act


    the injured

    think that

    it must

    the statute does

    collect under

    settlement negotiated

    Recovery Act

    payments in this case, we

    The language of

    the government to

    recovery

    wishes to invoke the

    out of

    person

    and

    law that permits such

    agreement

    designating for

    a
    the
    a
    the

    government a portion of the settlement.


    This

    case

    does

    not

    involve

    Cockerham v. Garvin,
    ____________________

    768

    F.2d 784,

    the
    787

    peculiar

    facts

    (6th Cir.

    of

    1985).

    ____________________
    3See Heusle v. National Mutual Ins. Co., 628 F.2d 833,
    ___ ___________________________________
    837 (3d Cir. 1980) (procedural restrictions); United States
    ______________
    v. Moore, 469 F.2d 788, 790 (3d Cir. 1972) (state doctrine of
    ________
    interspousal immunity), cert. denied, 411 U.S. 905 (1973);

    ____ ______
    United States v. Gera, 409 F.2d 117, 119-20
    ______________________
    (state statute of limitations).

    (3d Cir. 1969)

    -6-6-

    There the

    Sixth Circuit

    allowed recovery out

    proceeds

    where

    [injured

    "[t]he

    specifically agreed that part


    [injured person] would be
    the [United
    court

    tortfeasor

    of the money paid over

    held in escrow pending a

    the

    escrow

    "beneficiary" status akin to


    beneficiary of a contract.
    that

    settlement

    and

    to the
    claim by

    States] for specific medical bills . . . ."

    treated

    decided

    person]

    of settlement

    on

    remand

    should

    be

    as

    giving

    the

    The

    government

    that enjoyed by the third-party


    See id. at 784.
    ___ __
    the

    The

    government's

    determined

    considerations," taking account of any

    court also

    share
    by

    of

    the

    "equitable

    discounted settlement

    accepted by the victim and the litigation costs he had borne.


    Id. at 787.
    __
    there was

    The government does not argue that


    any third-part

    Holbrooks and Andersen.

    beneficiary agreement

    in this case
    between the

    Rather, the
    has

    been

    recover
    but

    United States

    misunderstood.

    says that its

    It argues

    rather,

    consistent with

    that does

    Andersen has
    exchange

    its

    attempt to

    from the escrow is not a claim against the Holbrooks


    the Recovery

    against Andersen, which supplied


    game

    that

    present claim

    for

    not reflect

    Act, is

    the funds.

    the reality

    a release

    of claims

    belongs to the Holbrooks and

    This is

    of the

    paid the settlement amount to


    ____

    a claim
    a word

    situation:

    the Holbrooks in

    against

    it.

    The money

    their son quite as much

    as Mr.

    -7-7-

    Holbrook's salary paid to him by the Navy belongs

    to him and

    not to the Navy which is the source of the funds.


    The

    best argument

    policy considerations.
    is not technically
    408, but

    for the

    United States

    is based

    on

    Andersen's payment to

    the Holbrooks

    an admission of liability,

    Fed. R. Evid.

    in reality the

    settlement reflects

    a judgment

    Andersen that there is a risk of liability and that the

    by
    case

    is worth

    that

    tortfeasor
    issue

    much

    to

    is liable

    mooted

    by the

    settle.

    to

    But

    to the extent
    _______________

    the Holbrooks

    settlement--it is

    the

    under tort

    law--an

    also liable

    to the

    United States for any medical costs paid by the latter.


    Of course the

    right to

    sue

    independently and, if it can prove liability, to collect

    its

    full
    But

    United States

    medical expenses
    everyone

    knows

    tortfeasor settles

    with no
    that

    settlement discount

    if

    with the

    still has a

    fault

    is

    at all.

    debatable and

    injured party, the

    the

    chances for

    the United States to recover may be much reduced.

    Any lawyer

    would prefer to try a tort case in which the co-plaintiff


    an

    injured

    two-and-a-half-year

    old,

    especially

    where

    is
    a

    verdict for the child virtually requires an award for the colitigant.
    What is
    an

    even more troubling is that

    incentive in

    such

    case

    something extra in settlement


    the two claims.

    to

    pay

    the tortfeasor has


    the

    injured

    party

    precisely in order to uncouple

    Once the United States is

    -8-8-

    left to litigate

    on its own, it not only has no sympathetic victim to take the


    lead before

    the

    expenses.

    jury

    but

    And, if (as

    indemnity

    agreement

    must

    bear

    its

    here) the alleged

    with

    the

    victim,

    own

    litigation

    tortfeasor has an
    making

    the

    latter

    responsible for any award to the United States, the victim or


    witnesses

    associated with

    the victim

    incentive to minimize the

    now have

    an economic

    tortfeasor's fault when the United

    States sues.
    These policy concerns are
    States is not without
    has the

    benefit

    of

    it anticipated

    provided

    much

    discovery

    its

    solution

    an

    the

    testimony.
    have

    lines

    the

    of

    is whether

    the United States

    "equitable" share

    by the court.

    cannot anticipate

    question posed

    by

    might well

    along the

    and victim settle,

    medical costs

    to so--it

    done

    cabin the witnesses'

    problem, Congress

    settlement to be determined
    not

    already

    case it

    The Recovery Act could easily have said that

    if the tortfeasor
    claim for

    the

    legislative

    Cockerham case:
    _________

    the United

    litigation resources, in this

    Holbrooks, and perjury laws


    Had

    not overwhelming:

    But

    the

    Congress did

    every problem--and

    the courts should

    of

    can

    do the

    so the
    repair

    work themselves.
    The answer here, we think, is

    no.

    The statute does not

    literally forbid this "equitable share" solution, but neither


    do the provisions of this reasonably detailed statute provide
    for any such

    recovery against the

    victim or the

    settlement

    -9-9-

    fund.

    Nor can we

    be certain

    that Congress

    would wish

    to

    impose an "equitable share" solution; perhaps it might pick a


    quite different solution or no solution

    at all.

    There is no

    magic formula to say when courts should do patch-work repairs


    to legislation, but in our view this is not such a
    Congress wants a

    solution, it is best

    case.

    for it to tailor

    own.
    The judgment of the district court is reversed.
    ________

    If
    its

    -10-10-

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