Miles et al v. Sunset Logistics Inc et al

Filing 52

Memorandum Opinion and Order granting 23 Motion for Partial Summary Judgment filed by Sunset Logistics Inc, 26 Motion for Partial Summary Judgment filed by The Centers for Medicare and Medicaid Services. (Ordered by Senior Judge A. Joe Fish on 4/22/2011) (mfw)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION

GERALD MILES, ET AL.,
Plaintiffs,
VS.
SUNSET LOGISTICS, INC., ET AL.,
Defendants.

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CIVIL ACTION NO.
3:10-CV-0872-G

MEMORANDUM OPINION AND ORDER

Before the court are the motion of the defendant, Sunset Logistics, Inc.
(“Sunset Logistics”), for partial summary judgment (docket entry 23), and the motion
of the third-party defendant, The Centers for Medicare and Medicaid Services
(“CMS”), for partial summary judgment (docket entry 26). For the reasons set forth
below, both motions are granted.
I. BACKGROUND
A. Factual Background
Gerald Miles and Barbara Miles (collectively, the “Miles”) were involved in a
hit-and-run automobile accident on August 17, 2007. Third Party Defendant The

Centers for Medicare and Medicaid Services’ Motion for Partial Summary Judgment
(“CMS Motion”) at 2 ¶ 1. CMS made conditional payments, under the Medicare
Program, of medical expenses incurred by the Miles as a result of the accident. Id. at
4 ¶ 11; Plaintiffs’ Response to Defendant CMS’ Motion for Partial Summary
Judgment (“Plaintiffs’ Response”) at 1. The Miles, however, sued Sunset Logistics,
John Doe, and Joseph Bell to recover for their injuries. Third Party Defendant The
Centers for Medicare and Medicaid Services’ Motion for Partial Summary Judgment
and Memorandum in Support Thereof (“CMS Memorandum”) at 3. After written
discovery in that suit, Sunset Logistics invoked Rule 167 of the Texas Rules of Civil
Procedure to recover its attorneys’ fees and also amended its pleadings to seek
affirmative relief from the Miles for maintaining the lawsuit in bad faith. Sunset
Logistics, Inc.’s Motion for Partial Summary Judgment and Brief in Support Thereof
(“Sunset Brief”) at 2-3. On August 17, 2009, the Miles amended their state-court
petition to join Allstate Indemnity Company (“Allstate”), their automobile insurance
carrier, for benefits under their uninsured/underinsured motorist policy. Id. at 3. On
October 5, 2009, the Miles and Sunset Logistics entered into a Texas Rule 11
settlement agreement (the “Rule 11 Agreement”). Id. (citing Rule 11 Agreement,
attached to Declaration of Kent J. Lisenby (“Lisenby Declaration”) as Exhibit B, located
in Sunset Brief). To that end, the Miles and Sunset Logistics subsequently executed a
Release, Confidentiality, Indemnity & Assignment Agreement (the “Assignment

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Agreement”). Id. (citing Assignment Agreement, attached to Lisenby Declaration as
Exhibit C, located in Sunset Brief). The Miles then non-suited Sunset Logistics by
order dated October 12, 2009. Id.
In February of 2010, the Miles and Allstate settled their dispute via mediation.
Id. Allstate agreed to pay $50,000 to settle Gerald Miles’ claim, and $22,500 to
settle Barbara Miles’ claim. Third Party Defendant’s Notice of Removal of Civil
Action (“Removal”) at 2. Following the mediation and settlement, Sunset Logistics
made informal allegations to Allstate that it had an assignment from the Miles for all
claims or rights to any settlement funds. Id. at 2-3. Shortly thereafter, on March 22,
2010, Allstate commenced this interpleader action in state court, bringing Sunset
Logistics back into the litigation and joining CMS because the action involves the
interests of the United States and its agency, United States Department of Health
and Human Services (“HHS”). CMS Memorandum at 2. CMS removed this case to
federal court pursuant to 28 U.S.C. § 1442(a)(1). Removal at 3-4. Allstate made an
unconditional tender of the disputed settlement funds into the registry of this court
on June 1, 2010.
The provisions of the Assignment Agreement at the heart of this dispute are as
follows:
1.

In consideration of Sunset Logistics, Inc.’s agreement to
non-suit its affirmative claims for attorney’s fees and
damages associated with its claim against the Claimants for

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the filing of frivolous pleadings in this case and asking the
Court to enter an order of non-suit dismissing such claims:
Gerald Miles and Barbara Miles, acknowledge the
receipt and sufficiency of the above mentioned
consideration and hereby enter into this Release of All
Claims and Assignment and do hereby release, acquit and
forever discharge Sunset Logistics, Inc. . . . of and from any
and all liability, claims, demands, damages, attorneys’ fees,
costs, actions, causes of action, claims related to loss of
consortium or suits in equity, for whatsoever kind or
nature whether heretofore or hereafter accruing or whether
Claimants now have or may hereafter have same or
whether same is now known or not known to Claimants,
for or because of any matter or thing done, admitted or
suffered as a consequence or as damages resulting from any
conduct, acts, omissions, representations, breach of any
duty, contract or statute, breach of any obligation, breach
of any fiduciary duty, breach of any general duty, or
negligence of any kind or character concerning the
automobile accident occurring on or about August 17,
2007 made the basis of this Agreement; or the settlement
of any and all claims related to the accident.
2.

Gerald Miles and Barbara Miles hereby warrant, represent
and covenant that as a result of the above incident, all bills
and liens associated with the accident made the basis of
this Agreement have been paid or satisfied, or will be paid
or satisfied. Claimants further warrant, represent and
covenant that any and all liens or subrogation claims of
any kind or whatsoever nature will be paid or satisfied by
Plaintiffs, or such amounts have been waived by the
lienholder, including, but not limited to all attorneys fees
incurred by Claimants in this matter.
***

9.

Gerald Miles and Barbara Miles hereby represent and
warrant that they have not transferred, conveyed, pledged,
assigned or made any other disposition of the claimed
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rights, interest, demands, actions or causes of action,
obligations, or any other matter covered by this Agreement.
...
***
20.

The Parties agree that each party will bear its own costs
including attorneys’ fees and that there will not be any
additional payment. In that regard, Gerald Miles and
Barbara Miles acknowledge and agree that attorney’s fees
and legal expenses have been taken into account in
reaching this settlement and are encompassed in the
settlement payment. No legal costs or attorney’s fees shall
be taxed as costs of court or otherwise against and any
released party.
***

22.

This Agreement states the entire agreement of the parties
with respect to the matters discussed herein, and
supersedes all prior or contemporaneous oral or written
understandings, agreements, statements or promises.
***

26.

Gerald Miles and Barbara Miles, as part of the
consideration previously mentioned, do hereby assign to
Sunset Logistics, Inc. all or so much of any cause of action,
chose of action, judgment, or settlement as they may have
against or from any person, firm or corporation, including,
but not limited to Sunset Logistics, Inc. or any of the
Released Parties related to any of the transactions or
occurrences made the basis of this Agreement the handling
and/or settlement of the related claim. This Assignment
grants and conveys to Sunset Logistics, Inc. the right, title
and interest in and to their causes of action against any of
the Related Parties or any other responsible party, for
negligence, breach of contract, fraud, negligence, deceptive
trade practices, or any other cause of action that does or
may exist arising out of the automobile collision made the
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basis of this Agreement or the settlement of the claims
arising out of the automobile collision an subsequent claim
made the basis of this Agreement. This assignment
conveys to Sunset Logistics, Inc. the full right and power to
maintain, to settle, to compromise, to reassign, and/or to
give a release in full discharge of liability of a cause of
action assigned to them hereunder. By this assignment,
Gerald Miles and Barbara Miles agree that they hold no
further claim, right, chose in action, cause of action,
damage or injury related to the accident made the basis of
this settlement agreement or the handling of the claim by
any of the released parties.
Assignment Agreement, attached to Lisenby Declaration as Exhibit C, located in Sunset
Brief (emphasis original).
B. Procedural Background
Both Sunset Logistics and CMS have moved for partial summary judgment.
Sunset Logistics claims that it is entitled to judgment as a matter of law because the
Miles made a valid assignment of choses in action to settle Sunset Logistics’ bad-faith
claim against them. Sunset Logistics, Inc.’s Reply to Both the Plaintiffs’ and CMS’
Respective Responses to the Defendant’s Motion for Partial Summary Judgment
(“Sunset Reply”) at 2. CMS argues that summary judgment is proper because it has a
statutory priority right to reimbursement for conditional payments made on behalf of
the Miles, as Medicare beneficiaries, for medical expenses resulting from the
August 17, 2007 automobile accident. CMS Memorandum at 4-5.
Summary judgment is proper when the pleadings, depositions, admissions,
disclosure materials on file, and affidavits, if any, “show[] that there is no genuine
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dispute as to any material fact and the movant is entitled to judgment as a matter of
law.” FED. R. CIV. P. 56(a), (c)(1).1 A fact is material if the governing substantive
law identifies it as having the potential to affect the outcome of the suit. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is
genuine “if the evidence is such that a reasonable jury could return a verdict for the
nonmoving party.” Id.; see also Bazan ex rel. Bazan v. Hidalgo County, 246 F.3d 481,
489 (5th Cir. 2001) (“An issue is ‘genuine’ if it is real and substantial, as opposed to
merely formal, pretended, or a sham.”). To demonstrate a genuine dispute as to the
material facts, the nonmoving party “must do more than simply show that there is
some metaphysical doubt as to the material facts.” Matsushita Electric Industrial
Company v. Zenith Radio Corporation, 475 U.S. 574, 586 (1986). The nonmoving
party must show that the evidence is sufficient to support the resolution of the
material factual issues in his favor. Anderson, 477 U.S. at 249 (citing First National
Bank of Arizona v. Cities Service Company, 391 U.S. 253, 288-89 (1968)).
When evaluating a motion for summary judgment, the court views the
evidence in the light most favorable to the nonmoving party. Id. at 255 (citing Adickes
v. S.H. Kress & Company, 398 U.S. 144, 158-59 (1970)). However, it is not

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Disposition of a case through summary judgment “reinforces the
purpose of the Rules, to achieve the just, speedy, and inexpensive determination of
actions, and, when appropriate, affords a merciful end to litigation that would
otherwise be lengthy and expensive.” Fontenot v. Upjohn Company, 780 F.2d 1190,
1197 (5th Cir. 1986).
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incumbent upon the court to comb the record in search of evidence that creates a
genuine issue as to a material fact. See Malacara v. Garber, 353 F.3d 393, 405 (5th
Cir. 2003). The nonmoving party has a duty to designate the evidence in the record
that establishes the existence of genuine issues as to the material facts. Celotex
Corporation v. Catrett, 477 U.S. 317, 324 (1986). “When evidence exists in the
summary judgment record but the nonmovant fails even to refer to it in the response
to the motion for summary judgment, that evidence is not properly before the district
court.” Malacara, 353 F.3d at 405.
II. ANALYSIS
A. Validity of the Assignment Agreement
The Miles oppose Sunset Logistics’ motion for partial summary judgment
because they believe that the Assignment Agreement “is void as a matter of law.”
Plaintiffs’ Response to Defendant Sunset Logistics, Inc’s Motion for Partial Summary
Judgment (“Miles Response”) at 1. The Assignment Agreement is void, according to
the Miles, because Sunset Logistics’ “assignment was nullified by their drafting of a
Rule 11 Agreement which required dismissal with prejudice against the very
Defendant from which they now claim standing to seek money.” Plaintiffs’ Brief in
Support of Response to Defendant Sunset Logistics, Inc.’s Motion for Partial
Summary Judgment (“Miles Brief”) at 3-4 ¶ 5. The Miles argue that because they
failed to dismiss their claims against Allstate in accordance with the terms of the Rule

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11 Agreement, their assignment of choses in action to Sunset Logistics is not valid.
The court disagrees.
In Texas, construction of an unambiguous assignment agreement “is a question
of law for the Court.”2 Wahlenmaier v. American Quasar Petroleum Company, 517
S.W.2d 390, 393 (Tex. Civ. App.--El Paso Dec 18, 1974, writ refused n.r.e.). The
general rule is that a cause of action may be assigned unless it is contrary to public
policy. State Farm Fire and Casualty Company v. Gandy, 925 S.W.2d 696, 707 (Tex.
1996). Texas courts invalidate “assignments of choses in action that tend to increase
and distort litigation.” Id. at 711. For example, the Supreme Court of Texas has
found the following four types of assignments inoperative on public policy grounds:
(1) an assignment of legal malpractice claims, id. at 707-08; (2) a Mary Carter
agreement, whereby a plaintiff assigns to a settling defendant part of his claims
against any nonsettling defendants, id. at 709; (3) an assignment of a plaintiff’s claim
to a tortfeasor as part of a settlement agreement, which would allow that defendant to

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“A contract is ambiguous when it is reasonably susceptible to more than
one meaning, in light of the surrounding circumstances and after applying established
rules of construction.” Commons West Office Condos, Limited v. Resolution Trust
Corporation, 5 F.3d 125, 127 (5th Cir. 1993) (citation and quotation marks omitted).
Mere disagreement over a contract’s interpretation, however, does not necessarily
render an agreement ambiguous -- for an ambiguity to exist, both interpretations
must be reasonable. Material Partnerships, Inc. v. Ventura, 102 S.W.3d 252, 258 (Tex.
App.--Houston [14th Dist.] 2003, pet. denied) (citations omitted). “It is objective,
and not subjective[,] intent that controls the meaning of the contract.” Commons
West, 5 F.3d at 127. Here, there is no dispute that the Assignment Agreement is
unambiguous.
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prosecute the claim against a joint tortfeasor, id. at 710; and (4) an assignment of
interests in an estate to circumvent a bar on contesting a will under the estoppel rule.
Id. at 711. The Miles do not contend that the Assignment Agreement at issue here
contravenes public policy; instead, they argue that it is invalid because it conflicts
with the terms of the Rule 11 Agreement, which -- according to the Miles -- was
incorporated by reference into the Assignment Agreement. Miles Brief at 1-3. The
Miles’ position is contradicted by the four corners of the Assignment Agreement.
In Texas, “it is a firmly established rule that the intention of the parties must
be determined primarily from the body of the written instrument itself.” Commons
West, 5 F.3d at 127. A court must examine the entire document and consider each
part with every other part so that it can determine the effect and meaning of one part
on any other. Mid-South Telecommunications Company v. Best, 184 S.W.3d 386, 390
(Tex. App.--Austin 2006, no pet.). All provisions of the agreement must be
considered with reference to the whole instrument, and in harmonizing disparate
provisions, terms stated earlier must be favored over subsequent ones. Coker v. Coker,
650 S.W.2d 391, 393 (Tex. 1983). Words will be given their “plain, common, or
generally accepted meaning unless the instrument shows that the parties used them in
a technical or different sense.” Best, 184 S.W.3d at 390-91 (citing Heritage Resources,
Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996)).

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Paragraph 22 of the Assignment Agreement states that it is “the entire
agreement of the parties with respect to the matters discussed herein, and supersedes
all prior or contemporaneous oral or written understandings, agreements, statements
or promises.” Assignment Agreement ¶ 22, attached to Lisenby Declaration as Exhibit
C, located in Sunset Brief. This paragraph unambiguously expresses the parties’
intention to disclaim any prior or contemporaneous agreements and be bound only
by the terms of the Assignment Agreement. Contrary to the Miles’ assertion, the
Assignment Agreement does not incorporate by reference the previously-executed
Rule 11 Agreement; the former supersedes the latter. Accordingly, there is no conflict
between the two, and the Miles’ failure to dismiss their claims against Allstate does
not affect the validity of the Assignment Agreement. Sunset Logistics is entitled to
judgment as a matter of law on its claim that the Miles validly assigned their rights in
action to Sunset Logistics via the Assignment Agreement.
B. Effect of the Miles’ Prior Assignment by Contract of
Contingent Fees and Expenses to their Attorney
The Miles argue that even if the Assignment Agreement is valid, it is “subject
to . . . [CMS]’ super lien and . . . the Miles’ prior assignment of 40% contingent
attorney’s fees and expense reimbursement to their attorney by contract.” Miles
Response at 1. Having concluded that the Miles’ assignment of choses in action is
valid, the court must now determine whether such assignment is subject to the Miles’

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prior assignment by contract of 40% contingent fees and expense reimbursement to
their attorney. The court concludes that it is not.
By the terms of paragraph 9 in the Assignment Agreement, the Miles
specifically represented and warranted that they had not “transferred, conveyed,
pledged, assigned or made any other disposition of the claimed rights, interest,
demands, actions or causes of action, obligations, or any other matter covered by this
Agreement. . . .” Assignment Agreement ¶ 9, attached to Lisenby Declaration as
Exhibit C, located in Sunset Brief. In paragraph 2, the Miles also warranted that all
bills and liens -- including “attorneys fees incurred by Claimants in this matter” -were already or would be paid or satisfied or waived by the lien holder. Id. ¶ 2
(“Claimants further warrant, represent and covenant that any and all liens or
subrogation claims of any kind or whatsoever nature will be paid or satisfied by
Plaintiffs, or such amounts have been waived by the lienholder, including, but not
limited to all attorneys fees incurred by Claimants in this matter.”). Finally,
paragraph 20 of the Assignment Agreement specifically states, “The Parties agree that
each party will bear its own costs including attorneys’ fees and that there will not be
any additional payment. In that regard, Gerald Miles and Barbara Miles
acknowledge and agree that attorney’s fees and legal expenses have been taken into
account in reaching this settlement and are encompassed in the settlement payment.”
Id. ¶ 20 (emphasis original). When these provisions are taken into account, the only

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reasonable interpretation of the Assignment Agreement is that the parties did not
intend to subject the Miles’ assignment of choses in action to any liens or claims for
attorneys’ fees and the assignment was not subject to any prior transfers or
assignments. Consequently, the Miles’ claim that their assignment of choses in action
is subject to their prior assignment by contract of 40% contingent attorneys’ fees and
expense reimbursement to their attorney fails as a matter of law. Accordingly, Sunset
Logistics is entitled to summary judgment.
C. CMS’ Right of Reimbursement
The only question remaining is whether CMS has a superior and priority claim,
as a matter of law, to a portion of the interpleader funds deposited in the registry by
Allstate. Neither the Miles nor Sunset Logistics dispute CMS’ superior and priority
right of reimbursement for conditional medical payments made on behalf of Gerald
Miles. Plaintiffs’ Response at 1 (“Plaintiffs are not opposed to CMS’ Motion for
Summary Judgment.”); Sunset Reply at 6 (“CMS is correct that Sunset is not
challenging CMS’s right of reimbursement. . . .”). Nor could they. 42 U.S.C.
§ 1395y(b)(2)(B)(i) (“The Secretary may make payment under this subchapter with
respect to an item or service if a primary plan described in subparagraph (A)(ii) has
not made or cannot reasonably be expected to make payment. . . . Any such payment
by the Secretary shall be conditioned on reimbursement. . . .”); see also Mathis v.
Leavitt, 554 F.3d 731, 733 (8th Cir. 2009) (“Congress authorized Medicare to

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recover from ‘any entity’ that receives payment for expenses conditionally paid for by
Medicare”).
Sunset Logistics, however, is challenging “whether or not the payments CMS
claims to have made on behalf of Gerald Miles related to the underlying automobile
collision.” Sunset Reply at 6. “If the facts are as Sunset suspects, CMS is simply
taking all of Gerald Miles’ medical expenses since the date of the accident and
associating them with the accident.” Id. According to Sunset Logistics, because
Gerald Miles “not only said that he was not hurt in the accident, but also had serious
preexisting conditions arising from a previous and unrelated automobile collision,
CMS should have to show that they money claimed is related to the collision made
the basis of this lawsuit.” Id. Sunset Logistic’s conclusory statements, however, are
not persuasive.
On a motion for summary judgment, factual controversies are resolved in favor
of the nonmoving party only if there is an actual controversy, that is, when both
parties have submitted evidence of contradictory facts. See Little v. Liquid Air
Corporation, 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). Here, Sunset Logistics
has not submitted any evidence to support its allegation that CMS’ conditional
payments were for medical expenses that were unrelated to the August 17, 2009
automobile accident. Sunset Logistics asks this court to infer that fact from Gerald
Miles’ deposition testimony regarding his pre-existing medical conditions, a transcript

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of a conversation he had with a representative of Allstate, and CMS’ objection to
Sunset Logistics’ request for production of Gerald Miles’ medical records. See generally
Sunset Logistics, Inc.’s Response to Medicare’s Motion for Summary Judgment. Such
an inference is unwarranted. CMS has submitted affidavit and documentary evidence
supporting its claim of conditional payments, and the Miles agree that CMS has a
super lien for $26,752.14, an amount that has been reduced from $65,547.70 as a
result of a series of adjustments and procurement reductions made by CMS. See
generally Appendix in Support of Third Party Defendant The Centers for Medicare
and Medicaid Services’ Motion for Partial Summary Judgment and Memorandum in
Support Thereof; Notice of Filing Corrected Exhibit B, Declaration of Sally Stalcup.
This court cannot, in the absence of any proof, assume that Sunset Logistics could or
would somehow prove that CMS is overstating its interest. See Little, 37 F.3d at
1075 (“We do not, however, in the absence of any proof, assume that the nonmoving party
could or would prove the necessary facts.”). Nor can this court find a genuine issue of
material fact based on Sunset Logistic’s bald assertions and mere suspicions.
Accordingly, CMS’ motion for partial summary judgment is granted.
III. CONCLUSION
For the reasons stated above, Sunset Logistic’s partial motion for summary
judgment is GRANTED, and CMS’s partial motion for summary judgment is also
GRANTED.

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Counsel for the parties shall confer and submit, within fifteen days of this date,
an agreed form of judgment in conformity with this memorandum opinion and order.
If agreement cannot be reached, each party shall submit his/her/its version of a
proposed judgment within fifteen days of this date.
SO ORDERED.

April 22, 2011.

___________________________________
A. JOE FISH
Senior United States District Judge

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