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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. O'Donnell v. Johnson (06/05/2009) sp-6378
Notice: This opinion is subject to correction before publication in the Pacific Reporter. Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts, 303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, e-mail email@example.com. THE SUPREME COURT OF THE STATE OF ALASKA
|SERENA L. ODONNELL,||)|
|) Supreme Court No. S- 12938|
|) Superior Court No.|
|v.||) 3AN-04-12557 CI|
|IRIS I. JOHNSON, JOHN F.||)|
|JOHNSON, and JANE DOE,||) O P I N I O N|
|Appellees.||) No. 6378 - June 5, 2009|
Appeal from the Superior Court of the State of Alaska, Third Judicial District, Anchorage, William F. Morse, Judge. Appearances: Brett von Gemmingen, Law Offices of Brett von Gemmingen, LLC, Anchorage, for Appellant. Barry J. Kell, Call, Hanson & Kell, P.C., Anchorage, for Appellees Iris I. Johnson and John F. Johnson. Before: Fabe, Chief Justice, Matthews, Eastaugh, Carpeneti, and Winfree, Justices. CARPENETI, Justice. I. INTRODUCTION I. The plaintiffs insurer paid her medical bills, thus acquiring a subrogation interest against the defendant and the defendants insurer. The plaintiffs insurer informed the plaintiffs attorney that it would recover its subrogated medical payments directly from the defendants insurer. The eventual settlement in the suit between the plaintiff and the defendant provided that, in addition to payment to the plaintiff, the defendants insurer would satisfy the subrogated medical claim directly with the plaintiffs insurer. The plaintiffs attorney nonetheless sought a portion of the subrogated medical payment as fees under the common fund doctrine, but the superior court refused. Because our settled case law controls this case and has not been altered by later case law, and because the plain language of the settlement offer did not contemplate that defendants would pay any part of the subrogated claim directly to plaintiff, we affirm the superior courts exclusion of the subrogation payment from the judgment entered and the superior courts determination that the defendant owes no additional attorneys fees. On the issue of post-judgment interest, we also affirm the decision of the superior court because the defendant repeatedly attempted to pay the plaintiff. II. FACTS AND PROCEEDINGS In November 2002 Serena ODonnell, insured by State Farm, was injured in an auto accident caused by Iris Johnson, who was insured by Allstate. After the accident, State Farm paid ODonnells medical bills, totaling $14,047, under the medical payments coverage portion of her policy, thereby obtaining a subrogated claim against the other driver and Allstate. In April 2003 State Farm sent a letter to ODonnells attorney informing him that it would pursue its subrogated interest directly with Allstate, and requesting that he not incur any expense or attorneys time on behalf of collection of State Farms medical payment lien. In February 2004 State Farm sent a letter to Allstate asserting a subrogation claim for the medical payment lien. In July 2007 the Johnsons made an offer of judgment to ODonnell. The terms of the offer were that the Johnsons would allow entry of judgment for plaintiff SERENA ODONNELL in this action for the sum of SIXTEEN THOUSAND DOLLARS ($16,000) plus Civil Rule 79 costs, prejudgment interest, and schedule Rule 82 (b)(1) attorneys fees. In addition, Allstate will satisfy the State Farm Insurance Company lien/subrogation interest ($14,046.80) directly to State Farm Insurance Company. ODonnell accepted the offer ten days later. On the same day, she filed a proposed final judgment with the superior court. That proposed judgment added the State Farm subrogation amount to the $16,000 to be paid to ODonnell to result in a $30,047 principal amount. The superior court entered this proposed judgment as the final judgment on August 1, 2007, omitting attorneys fees and costs from the total. On August 29, 2007, the Johnsons objected to the proposed final judgment on the grounds that the judgment was contrary to Alaska law and the plain language of the agreement. ODonnell responded that the objection was untimely, having been due within ten days of the entry of judgment in accordance with Alaska Rules of Civil Procedure 59(f) and 58.1(c)(3). In October 2007 the court determined that it had erred in signing the previous final judgment because of the omission of costs and fees and because the base figure for calculation of attorneys fees should not have included the satisfaction of the subrogated medical payment. The court vacated the judgment, and granted the Johnsons Motion for Relief of Judgment, calculating the fees, costs, and interest on the basis of the $16,000 offered to ODonnell in the original offer for judgment. ODonnell then moved to join Allstate and State Farm, claiming that State Farm was obligated to make an appearance in the case if it was the real party in interest regarding the medical payment claim, and that Allstate also should be joined, because Allstates offer to pay State Farm was an essential part of the judgment. ODonnell claimed these joinders were necessary to protect ODonnell against later claims for reimbursement from State Farm from the judgment paid to her and to ensure enforcement of all of the terms of the Johnsons offer of judgment to ODonnell. The Johnsons opposed the motion on the ground that the State Farm claim was never an element of ODonnells damages in her suit against the Johnsons under this courts rule in Ruggles v. Grow1 that a subrogated claim belongs to the insurer, who cannot be required to assert its claim as part of its insureds claim against the tortfeasor. Further, the Johnsons argued that ODonnell was aware at the time the agreement was signed that Allstate was not a party to the agreement. The court denied the motion to join the insurance companies and entered final judgment in November 2007. Several additional post-judgment motions were then litigated. These motions primarily concerned ODonnells attorneys refusal to accept payment from Allstate of the judgment calculated in October and refusal to sign a satisfaction of judgment, as well as the Johnsons attempts to obtain the release from the court registry of funds seized from their personal bank account by ODonnell after the initial incorrect judgment. For the first time in late November, ODonnells attorney notified the Johnsons by letter of his belief that they should pay one-third of the State Farm medical payment subrogation amount to him, although the letter also acknowledged that at that time the full claim had been paid directly to State Farm. At a hearing in January 2008, ODonnell argued that this courts ruling in Sidney v. Allstate,2 handed down that month, supported his claim that Allstate should pay him one-third of the sum it had already paid to State Farm. The superior court asked for briefing on that issue. The Johnsons argued to the superior court that Sidney affirmed the Ruggles rule. Therefore, Allstate did not owe any additional money on top of the settlement amounts already paid, and any claim for attorneys fees from the common fund should have been made against ODonnells insurer under the common fund doctrine. ODonnell replied that the money in the registry should simply be released to her. This money was the Johnsons personal money seized immediately after the initial judgment of $38,241 in August 2007, which the Johnsons had been attempting to have released from the court registry since November 2007. ODonnell also quoted the Johnsons counsels statement at the January hearing that, assuming common fund moneys were owed, Allstate would be liable for them rather than the Johnsons. The superior court issued a final order on these issues in February 2008. The court did not require the signing of a satisfaction of judgment, but ruled for the Johnsons on all other issues, ordering that (1) the Johnsons personal funds be released to them, (2) ODonnell accept the check from Allstate representing the corrected judgment amount determined in November 2007, (3) ODonnell was not entitled to attorneys fees on the State Farm medical payments claim, and (4) if the Alaska Supreme Court reverses this Court on the medical lien attorneys fees issue, then the amount owed to any Plaintiff . . . shall be paid by Allstate and not Iris Johnson or John Johnson. ODonnell appeals, raising three issues: First, she argues that the final judgment should have included the State Farm lien amount, either because the offer should have been interpreted to include that amount or because otherwise she would have been unable to enforce Allstates promise to satisfy the State Farm lien. Second, she claims that the common fund doctrine mandates payment of attorneys fees on the State Farm lien. Finally, she argues that post-judgment interest should have been awarded until the date that she accepted payment regardless of any fault on her part in the delay in accepting payment. III. STANDARD OF REVIEW I. Because interpreting the offer of judgment involves contract interpretation, we independently review whether the final judgment should have included the subrogated medical payment amount and whether Allstate or the Johnsons should have been required to pay any additional fees to ODonnell.3 The correct interpretation of our precedents also calls for independent review,4 as does determining the proper period of time for a post- judgment interest calculation.5 IV. DISCUSSION A. It Was Not Error To Exclude the Subrogation Claim from the Calculation of Final Judgment. A. Under Ruggles v. Grow,6 an insurer may explicitly direct its insured not to pursue its medical subrogation claim as part of the insureds lawsuit against the tortfeasor.7 Once the insurer has done so, the subrogated claim cannot be part of the insureds claim.8 State Farm cited Ruggles in a letter to ODonnells counsel early in the litigation process and directed him not to expend litigation efforts to recoup State Farms claim. State Farm then presented its claim directly to Allstate and requested that Allstate communicate directly with State Farm. The offer of judgment stated that Allstate would satisfy the medical subrogation lien directly with State Farm and explicitly did not include that amount in the judgment that the offer stated it would allow to be entered against the Johnsons. ODonnell presents two lines of argument for concluding that the judge erred in excluding the lien amount from the judgment. The first is that the offer was ambiguous and that her interpretation was more reasonable than the Johnsons interpretation; that is, that the Johnsons and the court misinterpreted the offer. The second is that the promise to satisfy the lien might not be enforceable because it was between non-parties to the suit. Neither argument succeeds. 1. The offer of judgment was not ambiguous. ODonnell asserts that the judgment did not match the terms of the Rule 68 offer of judgment and that she did not get the benefit of her bargain. Although the offer explicitly stated she would receive judgment in the amount of $16,000, she suggests there was room to disregard that unambiguous language and award judgment for $16,000 plus the medical lien amount. This appears to be because she assumed that the agreement referred to the fact that Allstate would satisfy the lien to State Farm only because she bargained for it. Therefore she also assumed that the offer represented a common fund. We have applied the common fund doctrine in situations in which an injured partys insurer benefits from her recovery of a settlement fund from which her insurer satisfies its medical lien subrogation.9 ODonnell appears to argue that the language of this agreement should have been interpreted to give rise to such rights. But here such an interpretation was unreasonable in light of Alaska law, which allows an insurer, by explicit direction, to prevent its insured from pursuing the insurers subrogation claim. It was not possible under Alaska law for ODonnell to regain the right to collect money on behalf of State Farm after State Farm told her not to do so in clear and emphatic terms.10 Further, the offer of judgment could not reasonably be interpreted to mean that the Johnsons agreed to have judgment in the amount of the lien entered against them, or that they would pay any part of the subrogated medical payment claim to ODonnell. The first sentence of the offer explicitly states that it will allow judgment to be entered against Johnson for $16,000 plus costs and attorneys fees. The second sentence provides that Allstate, [i]n addition, will satisfy State Farms subrogation amount directly to State Farm. Further, since the common fund doctrine, where it applies, applies to benefitted insurers,11 it would not have been a reasonable interpretation of the offer that it had any effect on whether ODonnell would be entitled to collect attorneys fees from Allstate or the Johnsons beyond what was stated explicitly in the offer. The offer of judgment is unambiguous with respect to the obligations the Johnsons agreed to undertake, and ODonnells interpretation is unreasonable. 2. No enforceability problems existed such that joinder of the insurance companies was required. 1. ODonnell further argues that unless the trial court joined State Farm and Allstate as parties, or made payment of the subrogation lien part of the judgment against the Johnsons, Allstates promise to pay the lien would be unenforeable. She further argues that since the trial court denied her motions to join the insurance companies,12 the only way to enforce her bargain with the Johnsons was to include the lien payment in the judgment. But she had no obligation to enforce the agreement as to Allstates payment to State Farm: State Farm had already notified her that it would be pursuing the claim on its own behalf. Further, under our ruling in Rice v. Denley,13 where two parties explicitly state that their settlement does not include the injured partys insurers subrogation claim, that insurer cannot collect its claim from the settlement.14 ODonnell therefore had no reasonable concern that if Allstate did not satisfy State Farms subrogation claim directly with State Farm, that State Farm would then return to collect it from ODonnell instead. The Johnsons statement in the offer that Allstate would satisfy the medical payment claim directly with State Farm made it clear that the judgment for ODonnell against the Johnsons did not include that amount. Ruggles held that where an insurer acquires a subrogated interest by payment of its insureds medical expenses, that subrogated claim belongs to the insurer.15 The plain language of the agreement and State Farms express direction to its insured not to pursue its medical lien claim place this situation clearly under Ruggles. ODonnells claim did not and could not include State Farms subrogated interest. B. It Was Not Error To Conclude that the Medical Payment Subrogation Satisfaction Was Not Common Fund Money for Which ODonnells Attorney Is Owed Fees. ODonnell argues that we should apply the common fund doctrine to this case without regard to the insurance companys directions to her not to pursue the case. First, she argues that under Sidney 16 we have already invoked the common fund doctrine without regard to insurance company authorization. Second, she argues that we should overrule Ruggles because of another equitable doctrine, the made-whole doctrine. We address each argument in turn. 1. Sidneys holding regarding the requirement of insurer authorization in the application of the common-fund doctrine does not apply to this case. 1. Under the common fund doctrine generally, a litigant or lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorneys fee from the fund as a whole.17 In the insurance context, where an injured plaintiff confers a benefit on his or her insurer by securing recovery for both, the insurer is liable for pro rata fees and costs based on what it recovers as a result of plaintiffs efforts. For example, in Alaska Native Tribal Health Consortium v. Settlement Funds18 (ANTHC), patients recovered from third party tortfeasors funds that were ultimately used to used to satisfy the Consortiums medical liens for treatment of the patients.19 Under unjust enrichment principles, we determined that it would be inequitable to allow the Consortium to retain the benefit of having its lien satisfied and not pay its share of fees and costs for the recovery. We relied on this rationale for the common fund doctrine: In hospital lien cases, the hospitals right to assert a lien, and its right to recovery based on that lien, depend by statute on the obtaining of a judgment or settlement. The proceeds of that judgment or settlement operate as a fund, and, without the fund, the hospital has nothing upon which to assert a lien . . . . The common fund doctrine is applied whenever a party obtains well-defined benefits for other parties.21 In ANTHC, without the judgment obtained by the patients there would have been nothing on which to enforce the lien, and the Consortium was ready and willing to take the benefits of the common fund so obtained.22 Thus, the elements of a common fund recovery under Alaska law are (1) the efforts of one party (2) result in the creation of a fund benefitting a third party (3) who is benefitted in a clear and well-defined manner, and (4) the third party is ready and willing to accept the benefits so obtained. In Sidney, we addressed the issue of an insurers readiness and willingness to accept the benefits of its insureds efforts where it accepted those benefits without objection.23 In that case, Sidney, the insured driver, settled with the driver who injured her for the limits of the at-fault drivers insurance policy, exhausting that policy and thereby triggering Sidneys rights to collect underinsured motorist insurance from her insurer, Allstate.24 Sidneys settlement with the at-fault drivers insurance company had designated $25,000 to be paid to her and $25,000 to be paid to her insurer to satisfy its medical payment subrogation lien.25 Regarding Sidneys right to have her insurer pay a pro rata share of the attorneys fees expended to obtain this settlement, we held that Sidneys pursuit of that claim conferred a direct benefit on her insurer.26 We reasoned that since $25,000 of the settlement satisfied Allstates medical subrogation lien, and Allstate neither expended effort to collect that $25,000 nor objected to Sidneys efforts to obtain it, but rather retained the benefit, the equitable rationale of the common fund doctrine should apply.27 Therefore, in that case, we ruled that Allstate owed a pro rata share of the attorneys fees and costs expended in settling with the at-fault drivers insurance company.28 Contrary to ODonnells assertion, the discussion of Ruggles in the Sidney opinion confirms the essential holding of Ruggles.29 We noted in Sidney that Ruggles allowed an insured injured party to include the subrogated claim in its claim against the tortfeasor if the insurer does not object.30 This is consistent with basic unjust enrichment principles, since a party who passively accepts a benefit can be held responsible for reimbursing the person who conferred the benefit under those principles.31 Sidney does not render the insurers authorization irrelevant, as ODonnell argues. If the insurer actively requests that the plaintiff not pursue her subrogation claim, there is no common fund because the insurer will not be collecting the lien from the plaintiffs recovery fund but will seek its own recovery. Conversely, the plaintiff may not collect the subrogated amount or attorneys fees on that amount, whether from her own insurer or from the defendant. In Sidney, the insurer did not take any action, but passively accepted the conferred benefit.32 Most jurisdictions agree that if an insurer chooses not to rely on the services of plaintiffs counsel and provides notice of this, there is no benefit conferred and no unjust enrichment, and thus the common fund rule does not apply.33 2. The made-whole doctrine does not apply to this case. ODonnell also argues that Sidney implicitly recognized equitable doctrines such as the made-whole doctrine, or, if it did not, we should now apply that doctrine to this case and overrule Ruggles. We disagree that the made-whole doctrine has any bearing on this case or was at all relevant to Sidney. The made-whole doctrine recognizes that there may be situations in which a defendants policy would be exhausted and the injured party would be left without being fully compensated for her own loss if her insurer collected the subrogation lien before she was herself compensated for her separate damages.34 This issue is not before the court now because ODonnell was fully compensated. The made-whole doctrine was also not an issue in Sidney because of her under-insured motorist protection.35 3. The promise that Allstate would pay common fund money is irrelevant. 1. Finally, ODonnell makes the claim that the Johnsons attorney repeatedly promised the trial court that any common fund monies owed to Ms. ODonnell would be paid by Allstate, implying that therefore Allstate has incurred a liability. But Allstates attorney merely stated that, if any common fund money were owed, Allstate would pay it rather than the Johnsons. Because we have held that no common fund money is owed, the promise is inapplicable. C. The Superior Court Did Not Err in Ruling that ODonnell Was Not Entitled to Post-judgment Interest After November 23, 2007. Final judgment in this matter was entered on November 11, 2007. Allstate mailed ODonnell a check for the amount of the judgment, which included post-judgment interest through November 23, 2007. That check was received by ODonnells attorney on November 20, 2007. ODonnells attorney notified the Johnsons counsel by letter on November 21, 2007 that he had received the check but that the Johnsons owed another $296 because the November 20 check and the Johnsons personal funds seized and held by the court registry did not cover the one-third of the State Farm satisfaction to which ODonnell now claimed to be entitled. On December 14, 2007, ODonnells attorney mailed the check back to Allstate. The Johnsons prevailed on a motion to compel ODonnell to accept the check on February 12, 2008. Under Farnsworth v. Steiner,36 an appellant may be entitled to post-judgment interest where she was not paid during the pendency of her appeal regardless of responsibility for that delay.37 However, payment to ODonnell was not delayed here. ODonnell had the check in her possession for twenty-five days and then chose to return it; the Johnsons attorney then had to expend additional resources to get her to accept it. We held in Providence Insurance Co. of Alaska v. Firemans Fund Insurance Cos.38 that the common law definition of when payment is tendered should guide the determination of when post-judgment interest accrual is tolled.39 At common law, tender required that the thing actually be produced and made available for acceptance and appropriation by the person to whom it is offered.40 Here, the Johnsons did tender payment to ODonnell on November 20, 2007, and no post-judgment interest should accrue after that payment. V. CONCLUSION Because no common fund money or attorneys fees are owed ODonnell under the plain language of the offer of judgment or under Ruggles v. Grow, and because the Johnsons in fact paid ODonnell before the deadline set in the final judgment and therefore owed no additional post-judgment interest, we AFFIRM the decision of the superior court in all respects. _______________________________ 1 984 P.2d 509 (Alaska 1999). 2 187 P.3d 443 (Alaska 2008) (holding that underinsured motorists carrier was liable for pro rata share of attorneys fees and costs for insureds efforts to obtain settlement with liability insurer). 3 See Pagenkopf v. Chatham Elec., Inc., 165 P.3d 634, 638 (Alaska 2007). 4 Sidney, 187 P.3d at 448. 5 Pagenkopf, 165 P.3d at 644. 6 984 P.2d 509. 7 Id. at 512 (Once [a request not to present insurers claim] was made [plaintiff] lost the right to present the claim.). 8 See id. 9 See, e.g., Alaska Native Tribal Health Consortium v. Settlement Funds Held for or to be Paid on Behalf of E.R. ex rel. Ridley, 84 P.3d 418, 432 (Alaska 2004) (applying equitable considerations to health care provider lien recovery and finding pro rata share of attorneys fees owed because injured partys litigation benefitted hospital with lien, hospital appreciated benefit, and it was unjust to allow hospital to benefit without paying its share of legal fees and costs). 10 See Ruggles, 984 P.2d at 512. 11 Cooper v. Argonaut, 556 P.2d 525, 527 (Alaska 1976) (interpreting workers compensation statute in light of equitable principles and holding that in order to insure that the employers compensation carrier is not unjustly enriched at the expense of the employee, we read AS 23.30.015(g) to require the proration between the carrier and the employee of litigation costs and attorneys fees incurred by the employee in recovering from a third-party tort-feasor.). 12 Although she listed the denial of her motion to join the insurance companies in her statement of points on appeal, ODonnell does not present any arguments on this point in her briefs. We therefore consider this issue abandoned. See Kodiak Elec. Assn, Inc. v. DeLaval Turbine, Inc., 694 P.2d 150, 153 n.4 (Alaska 1984) (holding that issues raised in points on appeal, but not adequately briefed, are deemed abandoned). However, the refusal to join the insurance companies would likely not be erroneous under the same reasoning used in this section. 13 944 P.2d 497 (Alaska 1997). 14 Id. at 500 (holding that meeting of minds was required as to whether settled claim included victims insurers subrogated claim and noting that if it was clear that both parties intended that the settlement agreement was only for the nonassigned portion of Denleys claim there would be no basis for Colonial to assert lien rights against the settlement proceeds.). 15 984 P.2d 509, 512 (Alaska 1999). 16 187 P.3d 443 (Alaska 2008). 17 Edwards v. Alaska Pulp Corp., 920 P. 2d 751, 754 (Alaska 1996) (quoting Boeing v. Van Gemert, 444 U.S. 472, 478 (1980)). 18 84 P.3d 418 (Alaska 2004). 19 Id. at 420-22. 20 Id. at 433 (quoting Martinez v. St. Joseph Healthcare Sys., 871 P.2d 1363, 1365 (N.M. 1994)). 21 Id. 22 Id. 23 187 P.3d 443, 453-54 (Alaska 2008). 24 Id. at 446. 25 Id. 26 Id. at 454. 27 Id. 28 Id. 29 Id. 30 Id. (quoting Ruggles v. Grow, 984 P.2d 509, 512 (Alaska 1999) (emphasis added)). 31 See, e.g., Alaska Native Tribal Health Consortium v. Settlement Funds Held for or to be Paid on Behalf of E.R. ex rel. Ridley, 84 P. 3d 418, 432 (Alaska 2004) (holding that passive beneficiaries required to bear fair share of costs). Appellees complain that the court in Sidney appears to have assumed that Sidney had authority to collect but that seems to miss one of the main points of the common fund doctrine, which is that express authorization is not required if the party charged with sharing the fees passively accepted a benefit. 32 187 P.3d at 453-54. 33 See, e.g., Richter, Wembley & Erickson, P.S. v. Honore, 628 P.2d 1311, 1313-14 (Wash. App. 1980); Travelers Ins.Co. v. Williams, 541 S.W.2d 587, 590 (Tenn. 1976). 34 Lee R. Russ, 16 Couch on Insurance 223:134 (2008). 35 See 187 P.3d 443, 445-46 (Alaska 2008). 36 638 P.2d 181 (Alaska 1981). 37 Id. at 185. 38 778 P.2d 200 (Alaska 1989). 39 Id. 40 Id. at 204.
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