United States District Court, Southern District of New York
May 15, 2003
ALBERT SAMMAM, PLAINTIFF,
JOAN CONYERS AND HOME DEPOT, DEFENDANTS.
The opinion of the court was delivered by: Gerard E. Lynch, United States District Judge
OPINION AND ORDER
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. § 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 recognized as payments of workers' compensation benefits except for insurance purposes, the settlement must be construed as a judgment that plaintiffs injury was not compensable.
New Jersey courts do not interpret the provision that the settlement has the effect of a dismissal as authorizing a subsequent tort suit against the employer. Sammam's argument has thus been authoritatively rejected by the New Jersey Supreme Court, which is of course the final authority on the meaning of the New Jersey statutory scheme. In Hawksby, that Court read the provision as precluding future workers' compensation claims based on the same injury, in contrast to Section 58 settlements, which have the same effect as an adjudication on the merits, and may be modified if the employee's condition worsens. Hawksby, 754 A.2d at 1173. The court went on to hold that Section 20 settlements preclude future tort actions based on the same injury, indicating that Section 20's dismissal provision pertains only to a settlement's effect with respect to future workers' compensation claims, not to future actions at law. A contrary holding would contravene Section 20's purpose of promoting efficiency and economy by avoiding litigation. The provision encourages an employer to compensate a potentially meritless claim, in return for the finality provided by the employee's giving up future benefits claims. Employers would have little reason to submit to Section 20's settlement provision if the statute contemplated that the finality accorded the workers' compensation claim could be disturbed by a tort suit.
Section 20's provision that settlement payments shall be recognized as workers' compensation payments only for insurance rating purposes does not imply that a settlement is a judgment that the employee's claim is not compensable. The language pertains to the characterization of the payments, rather than to the antecedent question of whether the employee's claim is compensable. In Sperling, the court found that this language does not exempt employees who have received settlements from the statutory prohibition on granting temporary disability benefits to recipients of workers' compensation payments, reasoning that "[t]he language of [Section 20] limiting consideration of lump sum settlements to insurance rating purposes pertains only to the calculation of premium rates and was not intended to contravene the strong legislative policy against duplication of benefits." Sperling, 693 A.2d at 904. Thus, the payment language does not purport to govern how the settlement is construed in substance — i.e., whether it is a denial of compensability or not — but simply how the payments are treated once the determination has been made.
Finally, plaintiff argues that the form on which his settlement was recorded contains language indicating that his claim was denied. (Edozie Decl. ¶ 10.) The form, entitled "Order Approving Settlement with Dismissal, N.J.S.A. 34:15-20," has a space labeled "Reason for [Section] 20," which is filled in with the phrase, "denied compensability." (Potash Affirm. Ex. D at 1.) Plaintiff argues that this establishes that the Division adjudged his claim ineligible for compensation. The Court, however, reads the statement as indicating simply that the parties were entering into a Section 20 settlement because Conyers had denied that the injury was compensable — thus putting jurisdiction into issue and bringing the parties within the framework of Section 20. Had the Division itself decided that plaintiffs injury was not compensable, it could not have approved the settlement, since that ruling would have meant that plaintiff was not entitled to any of the benefits of the workers' compensation scheme, including the settlement provision. In addition, it is clear from the hearing that took place before the judge approved the settlement that the Division made no such findings as to compensability. While the parties acknowledged the dispute as to employment, the judge enquired only about the terms of the settlement, and expressed no opinion on the dispute. Id. Ex. C.)
Because New Jersey considers a Section 20 settlement to have the effect of a judgment of compensability, thereby precluding all subsequent tort claims against the employer, plaintiffs claim against Conyers is barred by his settlement with her.
Conyers's motion for summary judgment against Sammam is granted.