Donald Goodemote v. Mushroom Transportation Company, Inc. Liberty Mutual Insurance Company, Intervenor, 427 F.2d 285, 3rd Cir. (1970)
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Scribd Government DocsDonald Goodemote v. Mushroom Transportation Company, Inc. Liberty Mutual Insurance Company, Intervenor, 427 F.2d 285, 3rd Cir. (1970)
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Scribd Government Docs427 F.
2d 285
Donald GOODEMOTE
v.
MUSHROOM TRANSPORTATION COMPANY, Inc.
Liberty Mutual Insurance Company, Intervenor, Appellant.
No. 18298.
United States Court of Appeals, Third Circuit.
Argued April 10, 1970.
Decided May 27, 1970.
Edward W. Maderia, Jr., Pepper, Hamilton & Scheetz, Philadelphia, Pa.,
for appellant.
Lawrence E. Grant, Richter, Lord, Toll, Cavanaugh, McCarty & Raynes,
Philadelphia, Pa. (B. Nathaniel Richter, Richter, Syken, Ross, Binder &
O'Neill, Philadelphia, Pa., on the brief), for appellee.
Before SEITZ and ALDISERT, Circuit Judges, and LATCHUM, District
judge.
OPINION OF THE COURT
SEITZ, Circuit Judge.
Plaintiff, a New York resident invoking diversity jurisdiction, sued Mushroom
Transportation Corporation, Inc., a Pennsylvania corporation, in the district
court for the Eastern District of Pennsylvania. He sought damages for injuries
sustained in an accident which occurred in Pennsylvania during the course of
his employment with a New York employer. During the trial the parties agreed
to settle the case for $60,000.00. Conflicting claims having been asserted to a
portion of the settlement fund, the entire fund was ordered paid into court. All
but $7,293.61 was subsequently distributed by the court, and the propriety of
that distribution is not challenged. Claims to the remaining funds were asserted
by the intervenor Liberty Mutual Insurance Company (Liberty Mutual) and by
plaintiff's attorney, B. Nathaniel Richter.
Liberty Mutual, as compensation insurance carrier for plaintiff's employer, had
paid plaintiff $7,293.61 in benefits under the New York Workmen's
Compensation Law. It claimed that under the New York Compensation Law,
when plaintiff settled with the alleged tortfeasor, the proceeds remaining after
payment of the attorneys had to be devoted to full reimbursement of the
compensation carrier. There is no question that Liberty Mutual's
characterization of the New York Law is correct. N.Y.Workmen's
Compensation Law 29(1) (McKinney's 1965); Ocean SS Co. of Savannah v.
Lumbermen's Mutual Casualty Co., 125 F.2d 925 (2d Cir. 1942).
Richter, on the other hand, contended in the district court that he personally
was entitled to a fee from Liberty Mutual under Pennsylvania substantive law
because he had created a fund for the benefit of the insurance carrier. He
argued that since Liberty Mutual was entitled to reimbursement from plaintiff
only because he, Richter, had recovered the $60,000.00 in the tort action, he
was entitled to an attorney's fee based on the same contingent fee percentage
the plaintiff had agreed to. The precise issue as the district court conceived it
was whether it should apply Pennsylvania law, which presumably would
warrant an award to Richter, or New York law, which would allow Liberty
Mutual's full claim without it bearing any part of the attorney's fee. The district
court found that Pennsylvania's interests in the case were controlling, applied
Pennsylvania substantive law and awarded Richter a fee.1 This appeal by
Liberty Mutual followed.
We emphasize that this matter was presented to and treated by the district court
as a claim by Richter in his own right. Richter insists in his brief to this court
that what is involved is the honoring of his fee arrangement with his client
which must be resolved by reference to Pennsylvania law. It is clear, however,
as his counsel agreed at oral argument, that regardless of the outcome of this
appeal, Richter has received or will receive the entire fee due him under his
agreement with plaintiff. His counsel also stated that Richter was not seeking
compensation beyond that fee.2 The reality then is that plaintiff rather than
Richter is the real party in interest. So viewed, plaintiff through Richter is
seeking reimbursement from Liberty Mutual for a portion of the fee which he is
required to pay Richter for his services in obtaining the $60,000.00 settlement.
The question on appeal, thus, is whether a district court order which in effect
requires Liberty Mutual to share plaintiff's expenses in the tort action is
correct?
Since the district court was sitting in a diversity action in Pennsylvania, it
follows that it was required to apply the Pennsylvania choice of law rule.
Would Pennsylvania apply New York law to the issue before us? We think the
answer is suggested by the analysis found in Elston v. Industrial Lift Truck Co.,
420 Pa. 97, 216 A.2d 318 (1966), although we recognize it is factually
dissimilar. In that case the Pennsylvania Supreme Court was concerned with a
Pennsylvania resident who had received benefits under the New Jersey
workmen's compensation law as a result of injuries incurred in the course of his
employment in New Jersey. Thereafter, in accordance with the New Jersey law,
the plaintiff Elston brought suit against a third party in a Pennsylvania court
seeking damages for the same injuries. The defendant tortfeasor sought to join
Elston's employer so as to obtain contribution. The employer objected on the
ground that no such claim could be asserted under New Jersey law. In contrast,
Pennsylvania law permitted a limited form of contribution from a negligent
statutory employer to a third party. With this choice of law issue before it, the
Supreme Court of Pennsylvania said in substance that the answer was to be
found not by the application of some mechanical rule but by an analysis and
weighing of the interests of the states involved. After engaging in such an
analysis, the court concluded that New Jersey law was controlling under the
circumstances because it was 'the state whose workmen's compensation
program is most significantly involved and the state, therefore, with the most
significant interest in the application of its policies to the instant dispute.' 216
A.2d at 324. It could find no competing values which would call for the
application of Pennsylvania substantive law, even though the plaintiff was a
Pennsylvania resident.
6
Adopting the Elston approach here, we can find no Pennsylvania policy which
would justify the application of its law to this issue. On the contrary, we think
all the relevant factors indicate the paramount nature of New York's interest.
Plaintiff, rather than his counsel, is the real party in interest. He is a New York
resident. His employment was covered by the New York Workmen's
Compensation Law. Moreover, he elected to receive benefits under the New
York law which explicitly requires him to bear all counsel fees when he
pursues his remedies against third parties. N.Y.Workmen's Compensation Law
29(1) (McKinney 1965). These facts compel the conclusion that the
Pennsylvania courts would apply the New York law here.
Section 29(1) of the New York Workmen's Compensation Law provides that-to the extent of the compensation payments-- the employee's recovery in the
third party tort action is 'deemed for the benefit of' the compensation carrier
and the carrier is granted a statutory lien for that amounnt. We think a
Pennsylvania court, in ordering distribution of the funds, would honor the
priorities established by the New York law, at least in the present setting.
Thus, we conclude that under the law properly applicable to this issue, Liberty
Mutual is entitled to the full $7,293.61.
The order of the district court dated September 24, 1969 will be reversed to the
extent it authorizes payment to the claimant Richter and the case will be
remanded to the district court with direction to enter an order in conformity
with this opinion.
'It is further Directed that the Clerk of the Court distribute the fund of
$7,017.61 as follows:
'a. One third thereof totaling $2,339.20 is to be paid over to Richter, Lord, Toll,
McCarty & Raynes.
'b. The balance of said fund totaling $4,678.41 is to be paid over to the Liberty
Mutual Company.'
Plaintiff has not challenged the distribution of $4,678.41 to Liberty Mutual.
It thus is clear that counsel is not the real party in interest because even by the
provisions of the New York statute, his claim for counsel fees has priority over
any claim by the insurance carrier. N.Y. Workmen's Compensation Law 29
