Middlesex Insurance Company v. Rodger, Sarah
Filing
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OPINION AND ORDER denying 12 Motion to Dismiss; denying as moot 22 Motion to Stay; granting 29 Motion for Leave to File; granting 31 Motion to Supplement; denying 35 Motion to Enforce Settlement. The schedule set forth in the pretrial conference order (dkt. # 26 ) remains in place. Signed by District Judge William M. Conley on 12/8/14. (jat)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN
MIDDLESEX INSURANCE COMPANY,
Plaintiff,
OPINION AND ORDER
v.
14-cv-244-wmc
SARAH RODGER,
Defendant.
On February 1, 2012, defendant Sarah Rodger was injured in a traffic accident
while traveling in Arkansas for her Wisconsin employer. Upon her return to this state,
Rodger filed a timely worker’s compensation claim with the Wisconsin Department of
Workforce Development. As the claims adjuster for the worker’s compensation policy,
plaintiff Middlesex Insurance Company (“Middlesex”) became obligated to pay insurance
benefits under the Wisconsin Worker’s Compensation Act, Wis. Stat. § 102.01 et seq.
On March 24, 2014, at a pre-suit mediation, Rodger reached a settlement
agreement under which she is to receive $858,820.70 in exchange for the release of the
at-fault driver, his employer, and his employer’s liability insurer.
On April 1, 2014,
Middlesex filed this action pursuant to 28 U.S.C. § 2201. Middlesex seeks a declaratory
judgment that it is entitled to reimbursement under Wis. Stat. § 102.29 for insurance
benefits paid to date, as well as those benefits it may be obligated to pay in the future as
a result of Rodger’s work-related accident. (Compl. (dkt. #1) 7.) At the time Middlesex
filed this action, it had already paid benefits to or on behalf of Rodger in the amount of
$284,021.01.
Before the court is Rodger’s motion to dismiss pursuant to Rule 12(b)(1), arguing
that there is no “actual controversy” between Middlesex and Rodger (Def.’s Mot. (dkt.
#12); Def.’s Br. (dkt. # 13)), which this court will deny for the reasons set forth below.
Also before the court is defendant’s motion for enforcement of a September 2014
settlement agreement between Rodger and Middlesex.
(Def.’s Mot. to Enforce
Settlement (dkt. #35).) On December 3, 2014, the court held a hearing on that motion,
and also denied it for the reasons set forth on the record and reiterated in brief below.
OPINION
I.
Motion to Dismiss
Because the motion to dismiss essentially challenges subject matter jurisdiction,
the court will address that motion first.1 The Declaratory Judgment Act, 28 U.S.C. §§
2201, 2202, gives courts of the United States discretionary power to issue declaratory
judgments. However, before a court can exercise that power there must exist an “actual
controversy.” 28 U.S.C. § 2201(a).
The “actual controversy” requirement of 28 U.S.C. § 2201 “tracks the ‘cases’ or
‘controversies’ requirement of article III, [and] saves the statute from unconstitutionally
1
In response to this court’s sua sponte order, which required plaintiff to submit an
affidavit and any supporting materials stating defendant’s domicile for purposes of
determining defendant’s citizenship (dkt. #3), plaintiff submitted an affidavit of
Middlesex representative and deposition testimony of Rodger stating that she now lives
in Georgia, having moved to there from Wisconsin (dkt. ##4, 4-1). The court finds this
submission sufficient to establish that the defendant is a citizen of Georgia, and thus,
that there is diversity of citizenship with plaintiff, Middlesex Insurance Company, an
insurance company organized under the laws of the State of Wisconsin with its principal
place of business in Stevens Point, Wisconsin. (Compl. (dkt. #1) ¶ 3.)
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expanding the federal courts’ jurisdiction.” Harris Trust & Sav. Bank v. E-II Holdings, Inc.,
926 F.2d 636, 639 (7th Cir. 1991) (alteration in original). As the Seventh Circuit points
out in Harris Trust, “[t]he often unspoken, but yet obvious, corollary of the ‘actual
controversy’ predicate is that the dispute must exist between parties to the declaratory
judgment action.” Id. at 639-40.
The United States Supreme Court has outlined the broad parameters of a
justiciable controversy in the context of the Declaratory Judgment Act:
A ‘controversy’ in this sense must be one that is appropriate for judicial
determination. A justiciable controversy is thus distinguished from a
difference or dispute of a hypothetical or abstract character; from one that
is academic or moot. The controversy must be definite and concrete,
touching the legal relations of parties having adverse legal interests. It must
be a real and substantial controversy admitting of specific relief through a
decree of a conclusive character, as distinguished from an opinion advising
what the law would be upon a hypothetical set of facts.
Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 240–41 (1937)). The controversy between
Middlesex and Rodger is not hypothetical, abstract, academic or moot; rather, it is
definite and concrete. Either Middlesex is entitled to be reimbursed from Rodger’s third
party settlement under Wisconsin’s subrogation law, or it is entitled to no such
reimbursement under Arkansas’s “make whole” law. The difference between those two
outcomes is also concrete and definite -- $284,021.01 -- at the time of the third-party
settlement.
Rodger argued that no “actual controversy” existed between the parties under
Wisconsin law, because the settlement had not yet been approved by a court of record
under Wis. Stat. § 102.29. The court disagrees. In relevant part, § 102.29 provides that:
A settlement of a 3rd-party claim shall be void unless the settlement and
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the distribution of the proceeds of the settlement are approved by the court
before whom the action is pending or, if no action is pending, then by a
court of record or by the department.
Wis. Stat. § 102.29(1)(d). Thus, before a court can approve the settlement and the
distribution of the proceeds of the settlement, the settlement and the distribution of the
proceeds of the settlement must be determined. That is exactly what Middlesex is asking
this court to do in filing its declaratory judgment action on April 1, 2014.2
II.
Motion to Enforce Settlement
Through written communications on September 12 and September 15, 2014,
Rodger and Middlesex purported to enter into a settlement for $217,500.00.
On
October 16, 2014, while finalizing the terms of the release and proposed order to the
court seeking approval of the settlement, a dispute arose regarding whether or not the
settlement preserved Middlesex’s right to a credit or “cushion” for future worker’s
compensation benefit payments it may be required to make to Rodger.
After it became obvious that the parties were unable to resolve this issue, Rodger
filed a motion on October 21, 2014, to approve and enforce the settlement as written
pursuant to Wis. Stat. § 102.29(1) (dkt. # 35), arguing that Middlesex agreed in writing
to release both past and future reimbursement claims in exchange for $217,500. (Def.’s
Br. (dkt. #36) 1.) Middlesex responded that there is an enforceable agreement but that
2
Defendant also challenges whether all of the necessary parties are included in this
declaratory judgment action. The court need not reach the issue since the other parties
(the tortfeasor, his employer, and any other insurance companies) have now settled their
claims. Even if these parties were necessary, the court could have joined them pursuant
to Fed. R. Civ. P. 17.
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the same writing expressly settled only the current lien (which, at the time of the
settlement had reached approximately $300,000) and preserved Middlesex’s right to a
future cushion (credit). Alternatively, Middlesex argued that there was no meeting of the
minds, and the court should not enforce the settlement. (Pl.’s Opp’n (dkt. #37).)
Rodger’s motion turns on the following language in defendant’s September 12,
2014, email accepting plaintiff’s offer: “This lien settlement is without prejudice to and
shall not [a]ffect Ms. Rodger’s open Worker’s Compensation claim beyond settlement of
the lien against the 3rd party settlement.” (Dkt. #40-1.)
Defendant Rodger contends
that this sentence means that the settlement will not affect Ms. Rodger’s continued receipt
of worker’s compensation benefits, while discharging any future lien claim Middlesex
might have.
In turn, plaintiff Middlesex contends that the sentence means that the
settlement only concerns the current lien and does not implicate Middlesex’s right to a
credit or cushion with respect to Rodger’s future benefit claims. While both parties have
an argument as to a plain reading of this sentence, either reading is reasonable so far as it
goes, since the sentence is silent (one suspects deliberately so) as to whether Middlesex
retains its claimed right to a credit (cushion) on future payments to Rodgers. Because
this term can mean different things to different reasonable persons, the court finds the
provision ambiguous. See Columbia Propane, L.P. v. Wis. Gas Co., 2003 WI 38, ¶ 25, 261
Wis. 2d 70, 661 N.W.2d 776 (“Contract language is ambiguous only if it reasonably
susceptible to more than one meaning.”).
Moreover, the extraneous documents submitted by both parties demonstrate that
the parties understood this sentence to have different meanings at the time they entered
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into the settlement agreement. Neither party spelled out clearly what was intended by
this language, gambling (and with the benefit of these documents, one could surmise
deliberately) that if a dispute arose in the future, it would be interpreted in their favor.
On this gamble, both sides lose.3
The court finds that there was no meeting of the minds with respect to this
particular contractual provision.
Herder Hallmark Consultants, Inc. v. Regnier Consulting
Group, Inc., 2004 WI App 134, ¶ 8, 275 Wis. 2d 349, 685 N.W.2d 564. (“Certainty of
contract terms concerns whether the parties had a meeting of the minds.”). Given the
size of the credit (cushion) at stake -- the parties float numbers valuing the credit at
approximately $75,000 -- the court further finds that the provision is essential. As such,
the court concludes that the settlement agreement is void. See Dunlop v. Laitsch, 16 Wis.
2d 36, 43A, 113 N.W.2d 551, 555 (1962) (holding that contract is void and
unenforceable where there is an “absence of a meeting of the minds as to an essential
term”).
ORDER
IT IS ORDERED that:
1) defendant Sara Rodger’s motion to dismiss (dkt. #12) is DENIED;
2) defendant’s motion to stay (dkt. #22) is DENIED AS MOOT;
3) defendant’s motions to file a reply brief (dkt. #29) and to supplement the
motion for leave to file a reply (dkt. #29) are GRANTED;
Both sides agreed at the hearing that the court could rule on the enforceability of the
settlement on the submissions by the parties and waived any arguable right to an
evidentiary hearing.
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4) defendant’s motion to enforce settlement (dkt. #35) is DENIED; and
5) the schedule set forth in the pretrial conference order (dkt. #26) remains in
place.
Entered this 8th day of December, 2014.
BY THE COURT:
/s/
________________________________________
WILLIAM M. CONLEY
District Judge
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