003 Brief - Motion to Enforce Settlement 2009-09-30
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Transcript of 003 Brief - Motion to Enforce Settlement 2009-09-30
HENRY & BEAVER LLPBy: Christopher J. CoylePa. I.D. No. 30686By: Amy B. LeonardPa. I.D. No. 93526937 Willow StreetP.O. Box 1140Lebanon, PA 17042-1140Tel (717) 274-3644Fax 717-274-6782Attorneys for Plaintiff
SALLY A. LINGLE, Plaintiff
v.
JOSEPH B. DeANGELO ,
Defendant
IN THE COURT OF COMMON PLEAS OF LEBANON COUNTY, PENNSYLVANIA
CIVIL ACTION-LAW No. 2008-00839
JURY TRIAL DEMANDED
PLAINTIFF’S BRIEF IN SUPPORT OF MOTION TO ENFORCE SETTLEMENT
I. HISTORY OF THE CASE
This is an auto accident case. Plaintiff was a pedestrian in the intersection of 7th
and Cumberland Streets in the City of Lebanon when she was struck and injured by a
car driven by Defendant. Plaintiff filed suit against Defendant, who was insured for
bodily injury liability by Erie Insurance Group. Erie retained counsel to defend the
action.
As the lawsuit progressed, Medicare paid some of Plaintiff’s accident-related
medical bills, and notified Plaintiff that it was asserting a lien in the amount of
$10,597.76 against any recovery Plaintiff might obtain from Defendant. Plaintiff’s
counsel notified Defendant, Erie, and defense counsel of the Medicare lien.
Settlement negotiations followed, and on July 9, 2009, the parties settled
Plaintiff’s claim for $70,000.00. In negotiations leading up to the settlement, the parties
and Erie agreed that Plaintiff and her undersigned counsel would be responsible for
satisfying the Medicare lien. (Motion to Enforce Settlement, Paragraphs 5 and 6,
Exhibit “A”, admitted by Defendant).
Pursuant to the settlement agreement, Erie and Defendant drafted a release that
starts by reciting “[Plaintiff], for and in consideration of the sum of Seventy Thousand
Dollars ($70,000.00), the receipt of which is hereby acknowledged, do hereby . . .
release . . . [Defendant and Erie] . . .” (emphasis supplied). (Motion to Enforce
Settlement, Exhibit “B”, admitted by Defendant). Consistent with the settlement
agreement, and at Defendant’s and Erie’s insistence, the release also contained the
following language (emphasis supplied):
“It is further understood and agreed that [Plaintiff] will indemnify and hold [Erie and Defendant] harmless from any and all liability, damages, costs, fees and expenses including, but not limited to medical bills, and expenses arising from any subrogation, indemnity or other claims/suits made by any person or entity as a result of any payments made to, or on behalf of [Plaintiff], which arise from and relate to any injuries, losses or damages incurred by [Plaintiff] due to the above-described incident. This promise of [Plaintiff] to indemnify, defend and hold [Erie and Defendant] harmless extends but is not limited to, the claims of all persons, insurers or entities which have paid . . . Medicare benefits (regardless of whether said benefits are paid by a privately funded plan or otherwise), or other similar benefits and are claiming an entitlement to indemnity/reimbursement from [Plaintiff] under any contract or pursuant to federal or state law or regulation.”
Plaintiff signed the release exactly as drafted by Defendant and Erie,
discontinued the lawsuit, and returned the signed release and a clocked copy of the
Discontinuance to Defendant’s counsel on July 28, 2009. (Motion to Enforce
2
Settlement, Paragraphs 8, 9, and Exhibit “C”, all of which are admitted by Defendant).
Rather than send Plaintiff a single check for $70,000.00, Erie sent Plaintiff two checks
totaling $70,000.00, payable as follows:
• “Sally Lingle and Henry & Beaver, LLP Her Attorneys”, $59,402.24
• “Medicare Secondary Payor Recovery Contractor”, $10,597.76 (“the Medicare
check”).
Plaintiff returned the Medicare check to Defendant and demanded that it be
reissued, payable to “Sally Lingle and Henry & Beaver LLP, her Attorneys”. Defendant
and Erie have refused to do so.
On August 21, 2009, Plaintiff filed a Motion to Enforce Settlement pursuant to
Pa.R.C.P. 229.1, asking that Defendant and Erie be ordered to pay $10,597.76, plus
4.25% simple interest from July 31, 2009, to “Sally A. Lingle and Henry & Beaver, LLP.,
her attorneys”, plus attorney’s fees. Defendant and Erie have filed an Answer and an
Amended Answer. On September 8, 2009, Plaintiff filed an Amended Motion to Enforce
Settlement, which simply requested additional relief. By agreement, the parties deem
the Amended Motion denied.
The matter is ready for resolution and listed for October 30, 2009 Argument
Court.1
1 In keeping with the customary practice in Lebanon County, Plaintiff discontinued the action before receiving any funds from Defendant or Erie. On Plaintiff’s motion, the Court, Tylwalk, P.J., struck off the discontinuance on August 31, 2009, in order to decide the instant motion.
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II. QUESTIONS PRESENTED
A. Have the parties entered into an enforceable settlement agreement?
Suggested Answer: Yes
B. Have Defendant and Erie breached the settlement agreement by insisting on making Medicare a sole, direct, or joint payee on settlement checks?
Suggested Answer: Yes
C. Should Defendant and Erie pay Plaintiff interest and reasonable attorney’s fees in connection with the filing of this Motion?
Suggested Answer: Yes
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III. SUMMARY OF PLAINTIFF’S ARGUMENT
There was an enforceable settlement agreement. Defendant offered $70,000.00.
Plaintiff accepted that offer. The parties, as the result of negotiations, agreed that
Plaintiff would satisfy the Medicare lien. Defendant and Erie drafted a release
consistent with the negotiated agreement, and Plaintiff signed it exactly as drafted.
By insisting that Medicare in some manner be named as a payee, Defendant and
Erie have breached the settlement agreement, since they admit that they agreed that
Plaintiff would pay Medicare. Even if it is assumed for argument’s sake that there was
no such agreement, Plaintiff can find no decision, law, regulation, or rule of court that
requires a settling defendant or carrier to name Medicare as a payee, nor can Plaintiff
find any authority for the proposition that a settling defendant or carrier has an
affirmative duty to satisfy a Medicare lien. To the contrary, the law does not so require.
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IV. ARGUMENT FOR PLAINTIFF
A. There is an enforceable settlement agreement
Settlement agreements are enforced according to principles of contract law. See
Mazella v. Koken, 559 Pa. 216, 224, 739 A.2d 531 (1999); Pulcinello v. Consolidated
Rail Corp., 784 A.2d 122, 124 (Pa.Super., 2001), appeal denied, 568 Pa. 703, 796 A.2d
984 (2002). “There is an offer (the settlement figure), acceptance, and consideration (in
exchange for the plaintiff terminating his lawsuit, the defendant will pay the plaintiff the
agreed upon sum).” Muhammad v. Strassburger, McKenna, Messer, Shilobod and
Gutnick, 526 Pa. 541, 547, 587 A.2d 1346, 1349, cert. denied, 502 U.S. 867, 112 S.Ct.
196, 116 L.Ed.2d 156 (1991). Where a settlement agreement contains all of the
requisites for a valid contract, a court must enforce the terms of the agreement. See
McDonnell v. Ford Motor Co., 434 Pa.Super. 439, 643 A.2d 1102, 1105 (1994), appeal
denied, 539 Pa. 679, 652 A.2d 1324 (1994).
In this case, Defendant offered $70,000.00 to settle the case. Plaintiff accepted
the offer, and provided the required consideration by signing a release of all claims and
discontinuing the suit. An additional negotiated term of the settlement agreement was
that Plaintiff would be responsible for satisfying the Medicare lien. This is demonstrated
by the letter of July 9, 2009, which expressly states that “[Plaintiff] will settle the
Medicare lien and provide you and Erie with proof. Additionally, [Plaintiff] agree[s] to
indemnification / hold harmless language in your release.” (Motion to Enforce
Settlement, Paragraphs 5, 6, Exhibit “A”). Defense counsel drafted a release with such
language, Plaintiff signed it without change, and the action was discontinued.
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It also bears noting that very first sentence of the release drafted by Defendant’s
counsel clearly contemplates the payment of the entire settlement amount directly to
Plaintiff: “KNOW ALL MEN BY THESE PRESENTS THAT I, Sally Lingle (Releasor), for
and in consideration of the sum of Seventy Thousand Dollars ($70,000.00), the receipt
of which is hereby acknowledged, do hereby remise, release . . .” (Motion to Enforce
Settlement, Exhibit “B”, emphasis supplied).
While Plaintiff does not concede the point, assuming for argument’s sake that the
release is ambiguous, the Court has the authority and responsibility to look outside the
terms of the release itself for other evidence to show both the intent of the parties and
the circumstances surrounding the drafting of the contract. See Harrity v. Medical
College of Pennsylvania Hospital, 439 Pa.Super. 10, 21, 653 A.2d 5, 10 (1994). Such
external evidence would be Plaintiff’s July 9, 2009 letter, Exhibit “A” to the Motion to
Enforce Settlement, as noted above.
B. Defendant and Erie have breached the settlement agreement.
i. Erie and Defendant have no right to involve themselves in the settlement of the Medicare lien.
Erie and Defendant have breached the settlement agreement because, contrary
to their contractual obligation, they have not paid Plaintiff $70,000.00. They are
resorting to semantics to argue that they have complied with the settlement agreement.
By sending Plaintiff a separate check payable solely to Medicare for the lien amount,
Defendant and Erie, with all the earnestness they can muster, claim that they “. . . are
attempting to have Plaintiff and Plaintiff’s counsel satisfy the Medicare lien by providing
two separate checks.” (Paragraph 13, Amended Answer to Motion to Enforce
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Settlement). Since it is payable solely to Medicare, Erie could have directly mailed the
Medicare check to Medicare from Erie Headquarters. Instead, they have mailed it to
Plaintiff and told her to re-mail it from the Lebanon Post Office! This is a distinction
without a difference. Erie and Defendant are engaging in legal hairsplitting.
When Plaintiff refused to accept a check payable solely to Medicare, Erie and
Defendant offered to issue a check in the lien amount payable to Medicare, Plaintiff, and
Plaintiff’s counsel. (Paragraph 15, Amended Answer to Motion to Enforce Settlement).
Since the Medicare Secondary Payor Contractor is in Detroit, this check would be, as a
practical matter, un-negotiable. This too violates the settlement agreement since,
contrary to the clear terms of the settlement agreement, Defendant and Erie are
attempting to inject themselves into the settlement of the Medicare lien.
ii. The law clearly places the primary duty to satisfy a Medicare lien on Plaintiff, not Defendant or Erie
Enforcement of Medicare Liens is governed by the Medicare Secondary Payer Act,
42 U.S.C. § 1395y(b)(2), et. seq. (“MSPA”), and relevant provisions of the Code of
Federal Regulations. The MSPA does not require Defendant and Erie to name
Medicare as a payee on settlement checks. They may be required to do so, but only in
certain situations - not applicable to the case at bar - are they mandated to do so. 42
C.F.R 411.24, “Recovery of Conditional Payments”, states in pertinent part (emphasis
supplied):
(h) Reimbursement to Medicare. If the beneficiary or other party receives a primary payment, the beneficiary or other party must reimburse Medicare within 60 days.
(i) Special rules.
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(1) In the case of liability insurance settlements and disputed claims under employer group health plans, workers' compensation insurance or plan, and no-fault insurance, the following rule applies: If Medicare is not reimbursed as required by paragraph (h) of this section, the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party.
(2) The provisions of paragraph (i)(1) of this section also apply if a primary payer makes its payment to an entity other than Medicare when it is, or should be, aware that Medicare has made a conditional primary payment.”
A “primary payer” is an entity that is required or responsible to make payment
with respect to an item or service under a primary plan. Such entities include insurers,
self-insurers, and third party administrators. 42 C.F.R. § 411.21. Therefore, Erie and
Defendant are “primary payers” and Plaintiff is a “beneficiary.”
Stated simply, the MSPA and relevant regulations require Erie and Defendant to
pay Medicare if, and only if, Plaintiff fails to do so.
Plaintiff can find no Pennsylvania state or federal decisions on this point, but at
least one federal court agrees with Plaintiff’s position. Tomlinson v. Landers, 2009 WL
1117399 (Middle District of Florida, 3:07-cv-1180-J-TEM, April 24, 2009). See
Appendix A. Nevertheless, Pennsylvania courts have dealt with the general subject of
when a lien attaches. A lienholder’s right to subrogation does not accrue until the
injured plaintiff actually receives the compensation from a settlement or verdict. See
Pennsylvania Manufacturers Association Insurance Company v. Wolfe, 626 A.2d 522,
525-26 (Pa. 1993), re-argument denied. A third-party or UIM insurance carrier does not
have any pre-existing fiduciary relationship to a potential lienholder simply by
possessing money or controlling assets to which the lienholder asserts a claim.
Southern Council of Industrial Workers v. Ford, 83 F.3d 966, 968-69 (8th Cir. 1996).
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The real motive for Defendant’s and Erie’s breach of the settlement agreement
can be found in Paragraph 10 of their original Response to Motion to Enforce
Settlement. Naming Medicare as a payee, they claim, “. . . simply guarantees to
Defendant and Erie that Medicare’s lien will be satisfied rather than Medicare pursuing
Defendant and Erie directly for the Medicare amount which Erie has experienced in
other cases when the Medicare lien has not been satisfied by plaintiff or plaintiff’s
counsel.” No specific cases were cited, and this unverified averment has since been
withdrawn by amendment.
Putting aside the fact that the MSPA and its regulations don’t support Erie, if Erie
can’t trust Plaintiff to satisfy the lien, why should Plaintiff trust Erie to do so? Plaintiff
has agreed to indemnify Erie and Defendant if the lien isn’t paid, but they have made no
such promises to Plaintiff, who is “on the hook” to the same extent if Medicare isn’t paid.
The law expressly places the primary duty to satisfy the lien on Plaintiff, and makes
Defendant and Erie only secondarily liable.
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iii. By breaching the settlement agreement, Defendant and Erie are interfering with Plaintiff’s counsel’s right to charge Medicare a fee and costs for
collecting its lien
Plaintiff’s insistence that she be permitted to settle the Medicare lien directly and
without interference from Defendant and Erie is not merely an academic exercise.
Plaintiff’s counsel is entitled by law to charge Medicare a reasonable fee and a pro-rata
share of costs advanced, since his efforts created the fund out of which Medicare will be
reimbursed. Federal regulations require Medicare to reduce the amount of its recovery
“to take account of the cost of procuring the judgment or settlement if: (i)[p]rocurement
costs are incurred because the claim is disputed; and (ii)[t]hose costs are borne by the
party against which [ Medicare] seeks to recover.” 42 C.F.R. § 411.37(a)(1). This
includes reasonable attorneys’ fees and costs advanced. See In re Zyprexa Products
Liability Litigation, 451 F.Supp 2d 458, 478 (E.D. New York, 2006).
Pennsylvania law is in accord. In Pennsylvania Manufacturers Association
Insurance Company v. Wolfe, supra, the Pennsylvania Supreme Court held that an
attorney for an injured employee was entitled to be paid first from a settlement fund
created by his efforts in a suit against a third-party tortfeasor, before the workers’
compensation carrier or the employee received any benefit from third-party settlement.
The court reasoned that the carrier could not expect to receive any settlement money
before the injured employee received such money, and that the employee in turn could
not expect to receive such money without first paying his attorney for creating the
settlement fund, per their fee agreement. 534 Pa. at 74-76, 626 A.2d at 525, 526.
11
Although it was a workers’ compensation case, our Supreme Court in Wolfe discussed
general principles of equitable subrogation, and they are applicable to the case at bar.
C. Defendant and Erie should pay Plaintiff interest and reasonable attorneys’ fees incurred in enforcing the settlement.
Pa.R.C.P. 229.1(g) requires the Court to impose sanctions if there is no material
dispute as to the terms of the settlement or the terms of the release. Sanctions under
the Rule are defined as simple interest at the Wall Street Journal Prime Rate for the first
edition of the applicable calendar year, plus one percent (1%), payable from the twenty-
first day after the release is received by Defendant, together with reasonable attorneys
fees incurred in the preparation of the affidavit2. The Wall Street Journal Prime Rate on
January 2, 2009 was 3.25%.
Plaintiff’s counsel estimates that he will spend at least 4 hours preparing, and
briefing the Motion to Enforce Settlement, as amended. Another estimated one hour
will be required, should there be oral argument. The Court should order Defendant and
Erie to pay simple interest at 4.25% per annum from July 31, 20093 plus attorney’s fees
at an hourly rate of $210.00.
2 Pa.R.C.P. 229.1(e) refers to the filing of an “affidavit” to enforce a settlement. Plaintiff asks the Court to treat her Motion to Enforce Settlement as such an affidavit.3 July 31, 2009 being three business days from the date the signed release and Discontinuance were mailed to defense counsel. Motion to Enforce Settlement, Exhibit “C”
12
V. CONCLUSION
Erie and Defendant have breached a contractual settlement agreement. Plaintiff,
Defendant, and Erie agreed that Plaintiff would directly settle the Medicare lien. Plaintiff
signed a release agreeing to indemnify and hold harmless Defendant and Erie if she
failed to do so. Plaintiff provided Defendant and Erie with a Settlement Distribution
Statement showing exactly how she proposed to reimburse Medicare. The law does
not require Medicare to be named as a payee, but does make Plaintiff – not Defendant
or Erie – primarily responsible for satisfying the Medicare lien.
The Court should grant Plaintiff’s Motion to Enforce Settlement and order
Defendant and Erie to:
(a) Immediately issue a check in the amount of $10,597.76, plus 4.25%
per annum simple interest from July 31, 2009 to the date of payment,
payable to “Sally Lingle and Henry & Beaver, LLP Her Attorneys”;
(b) Pay Plaintiff reasonable attorneys fees based on an hourly rate of
$210.00;
(c) Pay any interest that may be assessed pursuant to 42 C.F.R. §
411.24(h) and 45 C.F.R. § 30.13(d)(1) due to untimely satisfaction of
the Medicare lien (Amended Motion to Enforce Settlement); and
(d) Grant such other relief as the Court may deem appropriate.
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HENRY & BEAVER LLP
By:__________________________ CHRISTOPHER J. COYLE
I.D. #30686AMY B. LEONARDID #93526
937 Willow Street P.O. Box 1140 Lebanon, PA 17042-1140
(717) 274-3644 Attorneys for Plaintiff
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CERTIFICATE OF SERVICE
I, Christopher J. Coyle, of the firm of Henry & Beaver LLP, do hereby certify that
on the date below I served a certified true and correct copy of the within Brief in Support
of Motion to Enforce Settlement upon the following person(s) in the manner specified
below:
Name Manner of Service
Thomas B. Sponaugle, Esquire U.S. 1st Class MailGriffith, Strickler, et al. Attorney for Defendant110 S. Northern WayYork, PA. 17402-3737
______________________________CHRISTOPHER J. COYLE
Date: October ____, 2009
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APPENDIX A
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