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May 15, 2003


The opinion of the court was delivered by: Gerard E. Lynch, United States District Judge


Plaintiff Albert Sammam was injured while using a chainsaw on May 19, 2001, at the New Jersey home of defendant Joan Conyers. He filed suit against Conyers and defendant Home Depot, from which Conyers had rented the chainsaw, on May 15, 2002, in New York Supreme Court. Defendants removed the action to this Court on the basis of diversity jurisdiction. See 28 U.S.C. § 1332. Conyers now moves for summary judgment against plaintiff, arguing that the settlement reached between Conyers and plaintiff under the New Jersey Workers' Compensation Act on September 23, 2002, precludes this suit. The motion will be granted.


The facts of this case are quite simple, but its procedural history is tortuous. On the weekend of May 18, 2001, Conyers and her husband hired plaintiff to perform various tasks on the grounds of their New Jersey home. (Compl. ¶¶ 7-8.) One of the tasks involved cutting branches from a tree in the yard; for this purpose, Conyers rented a chainsaw from Home Depot. (Edozie Decl. ¶ 4.) While trimming the branches with the chainsaw, allegedly under Conyers's supervision (Compl. ¶ 9), Sammam accidentally partially amputated his hand (id. ¶ 14).

A year later, in May 2002, plaintiff retained John Edozie as counsel and filed this lawsuit, against Conyers and Home Depot, in New York Supreme Court, seeking $5 million in damages. He alleges that Conyers was negligent in supervising him, and that because the chainsaw was defective, Home Depot failed to use reasonable care in renting it out. (Id. ¶¶ 9-10.) In her answer, Conyers denies plaintiffs allegations, asserts a number of affirmative defenses, and also asserts two cross-claims against Home Depot (Conyers Ans. ¶¶ 15-16). Home Depot also asserts two cross-claims against Conyers, alleging that the chainsaw rental contract provided that Conyers would indemnify Home Depot for any damages arising out of injuries caused by the chainsaw. (Home Depot Ans. ¶¶ 13-18.)

In June and July 2002, both defendants moved separately to remove the action to federal court, despite the rule that all defendants must sign a single notice of removal, Sicinski v. Reliance Funding Corp., 461 F. Supp. 469 (S.D.N.Y. 1978). Home Depot filed a notice of removal on June 27, and the case was assigned to Judge Kaplan, who quickly remanded the case to state court based on defects in the removal notice. Meanwhile, Conyers filed a notice of removal on July 1, and the case was given a second docket number and assigned to me. The resulting confusion led to a delay of some weeks, during which plaintiff believed the case was proceeding in state court, and Conyers believed it to be in federal court, yet neither side acted to expedite the case or remedy the situation. All parties having now appeared before this Court and agreed that this is the proper forum for the dispute,*fn1 the Court can proceed to the task of untangling the other snarls in the case's history.

While the case was dormant because of the parties' confusion as to where the case was proceeding, a workers' compensation proceeding involving plaintiff was also in progress. At some point in 2001, plaintiff had retained attorney James Doran to file a petition for workers' compensation under the New Jersey Workers' Compensation Act. The claim was initially filed against Conyers's husband, Joseph Conyers, but Joan Conyers was later added as a party to the claim. (Potash Affirm. Ex. C.) The Conyerses also retained a different lawyer to represent them in the workers' compensation proceeding than the one who is representing them in this action. (Id.) On July 23, 2002, during the pendency of this lawsuit, they and plaintiff negotiated a settlement under Section 20 of the New Jersey Workers' Compensation Law, N.J. Stat. Ann. § 34:15-20 (2003). Section 20 provides for a negotiated, administratively-approved settlement between parties when a claim involves disputed issues as to "jurisdiction, liability, causal relationship or dependency of the petitioner." Id. At a hearing before a Judge of Compensation of the Division of Workers' Compensation (the "Division") on September 23, 2002, Sammam's attorney indicated that the Division's jurisdiction was in dispute, because there was "a very, very serious issue as to employment." (Potash Affirm. Ex. C at 2.) Thus, because it was unclear whether Sammam was Conyers's employee within the meaning of the statute, the parties elected to settle the claim rather than litigating his entitlement to workers' compensation. The Judge of Compensation approved the settlement, in which plaintiff received a lump-sum payment of $65,000 from the Conyerses, on September 23, 2002. Conyers did not receive a general release from plaintiff in exchange for the settlement, although this may not have been unusual, as the settlement was recorded on a form used specifically for Section 20 settlements, and the form does not contain any general release language. (Id. Ex. D.) The form does indicate, however, that plaintiff may not bring any further workers' compensation claims based on the accident.

The attorneys who represent Sammam and Conyers in this action have represented that they had no knowledge of the workers' compensation proceedings. Two months after the settlement was approved, however, Conyers moved for summary judgment against plaintiff, arguing that the workers' compensation settlement precludes any further claims based on the accident. Plaintiff opposes the motion on the ground that a Section 20 settlement is considered a denial of a workers' compensation claim under New Jersey law, and that therefore plaintiffs common law remedies are not precluded by the workers' compensation scheme.*fn2


New Jersey's Workers' Compensation Act provides that employers shall compensate their employees for injuries arising out of their employment, regardless of the employer's negligence. N.J. Stat. Ann. § 34:15-7. If the "employer and employee" have agreed that the employment will be subject to the Act (id.), "[s]uch agreement shall be a surrender of their rights to any other method, form or amount of compensation," id. § 34:15-8. The Act creates a presumption that "[e]very contract of hiring" accepts the provisions of the Act; to opt out of workers' compensation, the parties must specifically so provide in writing. Id. § 34:15-9. Thus, unless an employment contract specifies otherwise, an employee's on-the-job injuries will be eligible for workers' compensation payments, which will be the employee's sole remedy against his employer.

For the provisions of the Act to apply, however, the parties must be "employee and employer" within the meaning of the statute. The Act defines an employee as any person "who perform[s] services for an employer for financial consideration," but excludes workers whose employment is casual, irregular or nonrecurring. Id. § 34:15-36. When the parties dispute whether the claimant is an employee within this definition, and thus whether the injury is compensable under the Act, the parties can opt to settle the claim under Section 20, subject to Division approval. Id. § 34:15-20. Thus, Sammam contends that the Division's approval of his Section 20 settlement indicates that his injury was not compensable under the Act, and that therefore its exclusive remedy provision does not bar this action. Conyers argues that Sammam's receipt of a lump-sum payment through the workers' compensation framework means that his injury should be considered compensable under the Act for purposes of determining whether he can bring this action.

The parties agree that, since the accident occurred in New Jersey, New Jersey law applies to all of the claims in this action and governs the effect given to the Section 20 settlement. (Conyers Mem. at 4; Edozie Decl. ¶ 6.) New Jersey courts treat Section 20 settlements as the equivalent of an award of workers' compensation benefits. The New Jersey Supreme Court has held that once a settlement is approved by the Division, the claimant may not relitigate any of the issues underlying the settlement in a subsequent tort action: "[D]isposition pursuant to [Section 20] shall effectively preclude litigating the issue in either the Division [of Workers' Compensation] or the Law Division." Hawksby v. DePietro, 754 A.2d 1168, 1173 (N.J. 2000) (considering whether plaintiff could maintain tort suit against co-worker after settling claim against him pursuant to Section 20). This result follows from the fact that "[r]eceipt of a lump sum settlement under [Section 20] constitutes an implied acknowledgment that the claimant's disability was work-related and compensable under the Workers' Compensation Act." Sperling v. Bd. of Review, 693 A.2d 901, 904 (N.J. Super. Ct. 1997). By utilizing Section 20's presumption that an injury is compensable until proven otherwise, and accepting payment from the employer based on this presumption, the employee acts within the framework of the Act and benefits from its provisions. Thus, under New Jersey law, plaintiffs Section 20 settlement operates as a judgment that his claim was compensable under the Act, thereby barring this action against Conyers.

Plaintiff argues, however, that the language of Section 20 itself suggests that a settlement constitutes a judgment that a claim is not compensable under the Act. Section 20 provides:

Such settlement, when so approved, notwithstanding any other provisions of this chapter, shall have the force and effect of a dismissal of the claim petition and shall be final and conclusive upon the employee and the employee's dependents, and shall be a complete surrender of any right to compensation or other benefits arising out of such claim under the statute. Any payments made under this section shall be recognized as payments of workers' compensation benefits for insurance rating purposes only.
N.J. Stat. Ann. ยง 34:15-20. Plaintiff relies on this language to argue that, since a settlement is given the effect of a dismissal of the claim, and the payments are not to be ...

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