Conwed Corporation v. Union Carbide Corporation (2004)

Our plain-English summary of Conwed Corporation v. Union Carbide Corporation (U.S. District Court, District of Minnesota, February 11, 2004).

Conwed Corporation sued Union Carbide in a workers' compensation subrogation action under Minnesota law, asserting in its own name the tort claims of about 130 of its former employees. A footnote says earlier groups of employee claims involving mesothelioma and lung cancer were resolved or dismissed and were no longer before the court. The opinion does not describe the employees' work or exposure. Union Carbide had settled each of the 130 claims directly with the employees under a Minnesota procedure known as a Naig settlement. It counterclaimed that Conwed should contribute to those settlements in proportion to Conwed's own negligence, relying on Lambertson v. Cincinnati Corp. Conwed moved to dismiss, and the court treated the motion as one for summary judgment. The court granted it. It reasoned that a Naig settlement covers only damages not recoverable under workers' compensation, for which the third party alone is liable. Conwed therefore has no shared liability and receives no reimbursement from the settlement proceeds. The counterclaim was dismissed with prejudice.

We wrote this summary from the court's opinion with the help of AI. It is not the court's wording, and it is not legal advice. The full opinion is below.

The decision

• Court: U.S. District Court, District of Minnesota
• Decided: February 11, 2004
• Stage: Summary judgment
• State: Minnesota

Outcome. The court granted Conwed's motion (treated as one for summary judgment) and dismissed with prejudice Union Carbide's counterclaim for contribution to its Naig settlements with Conwed's former employees.

What the court held. Under Minnesota law, an employer has no obligation to contribute to a third-party tortfeasor's Naig settlement with an injured employee, because a Naig settlement covers only damages for which the employer is not liable and the employer's fault does not affect their allocation.

Issues decided: Fault, Apportionment and Settlement Credits, Employer and Contractor Liability, and Workers' Compensation, Settlements and Releases.

The defendants

• Union Carbide Corporation
• Conwed Corporation (employer)

The court's opinion

The text below is Google Scholar's copy of the court's opinion, a public record. Numbers in brackets, such as [*921], mark where each page of the printed reporter begins.

(2004)

CONWED CORPORATION, Plaintiff,

v.

UNION CARBIDE CORPORATION, Defendant.

Civil No. 5-92-88 (DDA/RLE).

February 11, 2004.

United States District Court, D. Minnesota.

Brownson & Ballou, PLLP, by ROBERT D. BROWNSON and KRISTI K. WARNER, Minneapolis, Minnesota, for Plaintiff Conwed Corporation.

Foley & Lardner, by TREVORJ. WILL and MICHAEL D. ROSENBERG, Milwaukee, Wisconsin, and LISA M. ELLIOTT, Minneapolis, Minnesota, for Defendant Union Carbide Corporation.

ORDER ON PLAINTIFF'S MOTION TO DISMISS COUNTERCLAIM

DONALD ALSOP, Senior District Judge.

This is a workers' compensation subrogationactionunder Minnesota law. In its present posture, the case involves the commonlaw tortclaims of approximately 130 former employees[1] of Plaintiff Conwed Corporation ("Conwed"), which Conwed asserts in its own name against Defendant Union Carbide Corporation ("Union Carbide"), as Minnesota law permits. See Minn. Stat. § 176.061 (defining an employer's subrogationrights under Minnesota's workers' compensationscheme). Union Carbide settled each of the 130 tort claims at issue with the employees pursuant to Naig v. Bloomington Sanitation, 258 N.W.2d 891 (Minn. 1977), whichallows an injured employee independently of the employer to settle that part of the employee's claims for damages against a third-party tortfeasor in which the employer has no subrogationinterest. Id. at 894-95. Union Carbide asserts by way of a counterclaim that Conwed is liable for contribution to those Naig settlements because Conwed's own negligence contributed to causing the former employees' injuries. Conwed has moved to dismiss Union Carbide's counterclaim, arguing that an employer has no contribution liability to a third-party tortfeasor as a matter of law when the third-party tortfeasor enters into a Naig settlement with an injured employee. Both parties have presented materials outside the pleadings in support of their positions, so the Court will treat Conwed's motion to dismiss as a motion for summary judgment. Fed. R. Civ. P. 12(b). Summary judgment is appropriate if no genuine issue of materialfact exists and if the moving party is entitled to judgment as a matter oflaw. Fed. R. Civ. P. 56(c). The parties do not dispute the pertinent facts. Because Minnesota law does not require an employer to contribute to a third-party tortfeasor's Naig settlement with an injured employee, the Court will grant Conwed's motion.

Union Carbide bases its claim for contribution on Lambertson v. Cincinnati Corp., 257 N.W.2d 697 (Minn. 1977), so Lambertson is the appropriate starting point for an analysis of Union Carbide's counterclaim. The plaintiff in Lambertson was injured at work while operating a machine that a third party had manufactured. Id. at 682. The plaintiff brought a products liabilityactionagainst the manufacturer of the machine, who in turn brought the plaintiff's employer into the suit. Id. at 683. A jury found all parties negligent and apportioned 15 percent of the fault to the plaintiff, 25 percent to the manufacturer, and 60 percent to the employer. Id. The trial court denied the manufacturer's claim for contribution or indemnity fromthe employer and entered judgment against the manufacturer for the full amount of the verdict less 15 percent for the plaintiff's fault. Id. On appeal, the Minnesota Supreme Court noted the inequity of requiring the manufacturer, who had significantly less fault than the employer, to bear responsibilityfor the entire tort judgment and, furthermore, to reimburse the employer through subrogation for worker's compensation benefits paid to the injured worker. Id. at 684. To remedy that situation, the Minnesota Supreme Court allowed the manufacturer to obtainlimited contribution from the employer. Id. at 689. The amount of the employer's contributionmust be "proportionalto [the employer's] percentage of negligence, but not to exceed its total workers' compensation liability to plaintiff," in order to protect the employer from paying more than its statutory workers' compensation obligation to the employee. Id.

Union Carbide invokes the equitable principles underlying Lambertson in support of its counterclaim. Although Conwed's injured employees are not involved inthis case, UnionCarbide argues that its settlement payments to those employees are the functional equivalent of jury verdicts and that, as in Lambertson, Conwed should contribute to each settlement payment an amount proportional to Conwed's fault in causing the employee's injury but not to exceed Conwed's workers' compensation liability to that employee. Lambertson contribution in practice has the effect of limiting the employer's subrogation interest, Hortonby Horton v. Orbeth, Inc., 342 N.W.2d 112, 115 (Minn. 1984), and Union Carbide similarly suggests that its counterclaim should act as an equitable setoff to Conwed's subrogation claim. Union Carbide, in other words, does not seek an affirmative recovery from Conwed but instead seeks to reduce Conwed's subrogation interest by the amount Conwed would be required to contribute to Union Carbide's settlements under Lambertson. This procedure, according to Union Carbide, would ensure that Conwed does not pay more than its workers' compensation liability while at the same time requiring Conwed to take responsibility for its negligence to the extent that Lambertson permits. UnionCarbide's positionis consistent withsome of Lambertson's reasoning, but Union Carbide's argument is flawed because it fails adequately to consider the complete reimbursement procedure of which Lambertson contribution is a part. If an injured employee receives a verdict against a third-party tortfeasor, the rights of the employee, the employer, and the third-party tortfeasor to the proceeds of the resulting judgment are determined through a three-step procedure:the third-partytortfeasor first pays the employee the full amount of the judgment, the employer then pays any Lambertson contribution to the third-party tortfeasor, and the employee finally reimburses the employer for workers' compensationbenefits paid and payable by allocating the judgment proceeds through the formula set out in Minn. Stat. § 176.061 Subd. 6[2] Johnson v. Raske Bldg. Sys., Inc., 276 N.W.2d 79, 81 (Minn. 1979). The employer in the end receives some reimbursement and possibly a credit against future workers' compensationpayments from the proceeds to which the employer in effect contributed. A Naig settlement, on the other hand, is distinguishable from a tort judgment in that none of the settlement proceeds are subject to the statutory allocation formula, and the employer accordingly has no claim on those proceeds and receives no reimbursement or credit as a result of the settlement. Naig, 258 N.W.2d at 894. Union Carbide thus is incorrect inassuming that the equities justifying Lambertson contributionto a tortjudgment continue to exist after a Naig settlement. The reasoning in Naig infact indicates that the justification for Lambertson contribution disappears altogether if the employee and a third-party tortfeasor enter into a Naig settlement. Lambertson contribution exists to limit a third-party tortfeasor's liability, insofar as practicable, "to no more than its established fault." 257 N.W.2d at 685. A Naig settlement, however, "concerns only damages not recoverable under workers' compensation." 258 N.W.2d at 894. Stated another way, a Naig settlement concerns only damages for which the third-party tortfeasor is exclusively liable to the injured employee, which is why the employer has no interest in the proceeds of a Naig settlement. Id. If the employer has no liability for the damages paid through a Naig settlement, the employer's fault can have no bearing upon the allocationof those damages. Although Union Carbide argues that an employer need not have common liability for damages settled under Naig in order to justify contribution to the settlement, some form of common liability is a necessary predicate for imposing contribution liability on the employer. See Horton, 342 N.W.2d at 114-15 (discussing Lambertson).

Union Carbide, finally, cites no authority other than Lambertson in support of its position. The Minnesota Supreme Court has not directly held that Lambertson is inapplicable in a Naig context but has noted in dicta that an employer, regardless of fault, "is not liable to contribute to the sum the tortfeasor paid the employee to settle the `nonrecoverable' damages under the Naig release." Tyroll v. Private Label Chems., Inc., 505 N.W.2d 54, 61 (Minn. 1993). The Minnesota Court of Appeals has affirmatively held that an employer has no obligation to contribute to a Naig settlement, albeit in an unpublished case. Sargent v. Schwing Am. Inc., No. C3-93-946, 1993 WL 469179, at [*1] (Minn. Ct. App. Nov. 16, 1993) (unpublished opinion). In the absence of any contrary Minnesota authority, this Court also holds that Conwed has no obligationto contribute any amount to Union Carbide's Naig settlements with Conwed's former employees. Because all the former Conwed employees at issue in this case entered into Naig settlements with Union Carbide, Union Carbide has no basis for maintaining its counterclaim.

For the foregoing reasons, IT IS HEREBY ORDERED THAT:

1. Conwed's motion to dismiss Union Carbide's counterclaim for contribution is GRANTED.

2. Union Carbide's counterclaim is DISMISSED in its entirety with prejudice.

[1] The Court earlier entered final judgment pursuant to Fed. R. Civ. P. 54(b) on a group of employee claims involving mesothelioma, and the parties voluntarily dismissed a group of employee claims involving lung cancer. The employee claims in those groups no longer are before the Court.

[2] In the alternative, the employee may petition the trial court to allocate the verdict between damages recoverable and not recoverable under workers' compensation and include only the damages recoverable under workers' compensationinthe Minn. Stat. § 176.061 formula. Drake v. Reile's Transfer & Delivery, Inc., 613 N.W.2d 428, 433 (Minn. Ct. App. 2000).

Sources

• The opinion on Google Scholar
• Minnesota asbestos laws
• Minnesota asbestos exposure sites