Muhammad Sydur RAHMAN, Plaintiff, v. Ray A. BUSBY, Defendant.
Plaintiff's motion seeking apportionment of litigation expenses under Workers' Compensation Law § 29(1), a compromise order under Workers' Compensation Law § 29(5), or both forms of relief, is denied.
On July 20, 2013, plaintiff was involved in a pedestrian-knockdown accident. Plaintiff was struck by a motor vehicle operated by defendant as plaintiff was crossing a Manhattan street. At the time of the accident, plaintiff was functioning in the course of his employment with Dunkin' Donuts.
Plaintiff commenced this action to recover damages for the personal injuries he sustained in the accident. Plaintiff claimed that defendant's negligence caused him to suffer, among other things, injuries to his knees and lumbar spine, and bilateral carpal tunnel syndrome. Defendant answered the complaint, disclosure was completed and a note of issue was filed.
Because plaintiff was injured in the course of his employment, he applied for and received Workers' Compensation benefits from his employer's carrier, The Hartford. The carrier has paid plaintiff $151,685.52 in benefits—$91,307.02 for lost wages and $60,378.50 for medical bills. The Hartford has a lien for the benefits it has paid plaintiff against any recovery by plaintiff (see Workers' Compensation Law § 29 ).
This trial-ready action is at the precipice of settlement: defendant has offered and plaintiff is interested in accepting $90,000 to resolve the action.1 However, in order to consummate the settlement, plaintiff must resolve the Workers' Compensation lien with The Hartford.
Plaintiff and The Hartford discussed resolving the lien. The Hartford took the amount of benefits paid to plaintiff—$151,685.52—and subtracted $50,000, representing the basic economic loss covered by the no-fault law (see Workers' Compensation Law § 29[1-a] )—resulting in a lien $101,685.52. The amount of the proposed settlement between plaintiff and defendant was therefore less than the amount of the lien. For the purposes of calculating the lien of which it would demand satisfaction, The Hartford proposed taking the $90,000 settlement sum and reducing it by approximately 34%, which reflected plaintiff's attorneys' fees and the disbursements and fees incurred in prosecuting the action and procuring the settlement offer (see Workers' Compensation Law § 29 ). Based on its calculation, The Hartford sought an apportionment of the settlement proceeds that would result in the carrier receiving approximately two-thirds of them—$59,054.48 (“the adjusted lien”).2 All or almost all of the remaining settlement proceeds would go to plaintiff's counsel as the attorneys' fee, and plaintiff would receive little, if any, of the proceeds.
Plaintiff's counsel made a counter-proposal to The Hartford: the settlement proceeds should be divided equally among plaintiff, plaintiff's counsel, and The Hartford. One-third of the proceeds would go to plaintiff, one-third of the proceeds would go to plaintiff's counsel as an attorneys' fee, and one-third of the proceeds would go to The Hartford to satisfy the lien. Under plaintiff's approach, he would receive approximately $30,000 from the settlement, giving him a direct recovery under the settlement that he would not enjoy under The Hartford's proposal; The Hartford would receive approximately $30,000 from the settlement, representing approximately half of the sum it sought in its proposal; and plaintiff's counsel would receive the same or substantially the same attorneys' fee as he would under The Hartford's proposal.
Plaintiff and The Hartford were not able to settle the Workers' Compensation lien dispute. Therefore, plaintiff made the instant motion, under Workers' Compensation Law § 29, to “settl[e] and compromise[e]” the lien. On the face of the order to show initiating this motion, plaintiff references Workers' Compensation Law § 29(5), which, as is relevant to this matter, requires either the consent of the carrier to settle the action or a court order allowing for the settlement, i.e., a compromise order. In the affirmation in support of the motion, however, plaintiff focuses on subdivision 1 of the statute, which, among other things, addresses the equitable apportionment of the litigation expenses incurred in securing a recovery in the action.
Plaintiff argues that the court has the power both to equitably apportion the settlement proceeds and to modify the lien, and should do so in the 1/3-1/3-1/3 manner his counsel proposed. The Hartford's proposed allocation of the settlement proceeds would, according to plaintiff, be unfair to him, leaving him with little to no direct recovery as a result of the settlement. In support of his motion, plaintiff submits the police accident report relevant to the subject accident, and a letter from an employee of The Hartford to plaintiff's counsel memorializing the carrier's proposal.
The Hartford opposes plaintiff's motion. The Hartford maintains that its calculations of the lien amount of $101,685.52 and the $59,054.48 adjusted lien comport with Workers' Compensation Law § 29 and the case law interpreting it. Moreover, the carrier maintains that it cannot be compelled to reduce the amount of the adjusted lien to which it is statutorily entitled. Although it did not move for any relief (see CPLR 2214, 2215), The Hartford requests in its opposition papers that the court issue an order setting the carrier's adjusted lien based on a $90,000 settlement at $59,054.48 and declaring that lien valid. With its opposition, The Hartford submits a Workers' Compensation payment ledger reflecting the benefits the carrier paid to plaintiff.
To the extent that plaintiff seeks a compromise order under Workers' Compensation Law § 29(5), that relief is denied. Subdivision 5 states, in pertinent part, that “[a] compromise of [a] cause of action by the employee at an amount less than the compensation provided for by this chapter shall be made only with the written approval of the insurance carrier However, written approval of the insurance carrier need not be obtained if the employee obtain[s] a compromise order from a justice of the court in which the [tort] action was pending.” Thus, “[i]f the [plaintiff] intends to compromise the [tort] action for a sum less than the total compensation paid or payable, [he or she] must obtain the written consent of the one paying the compensation benefits, or obtain an order on notice, from the court approving the settlement” (Minkowitz, Practice Commentaries, McKinney's Cons Laws of NY, Workers' Compensation Law § 29, “Consent to Settle,” at 238 [main vol.] ).3 When a compromise order is sought, the plaintiff must submit to the court an application for that relief containing a petition, an affidavit of plaintiff's attorney, and the affidavit of one or more physicians. The information that the petition, attorney's affidavit and physician's affidavit each must provide is specified in Workers' Compensation Law § 29(5).4 Here, plaintiff's motion contains none of the documents required for an application for a compromise order; plaintiff has not provided a petition, an attorney's affidavit containing the information demanded by Workers' Compensation Law § 29(5), or a physician's affidavit.
With respect to that aspect of plaintiff's motion seeking relief under Workers' Compensation Law § 29(1), the Court of Appeals reviewed the operation of subdivision 1 in Kelly v. State Insurance Fund, 60 N.Y.2d 131, 136-137, 468 N.Y.S.2d 850, 456 N.E.2d 791 (1983):
“Section 29 of the Workers' Compensation Law governs the rights and obligations of employees, their dependents, and compensation carriers with respect to actions arising out of injuries caused by third-party tort-feasors. A claimant has the first right to bring a [tort] action, and, while undertaking such an action, may continue to receive compensation benefits. In the event that a claimant recovers in a [tort] action, the compensation carrier is granted a lien on the amount of the recovery proceeds equal to the amount of past compensation it has paid, with interest. The lien, however, is subordinate to a deduction for costs and attorney's fees. The statute was amended in 1975 to also provide: ‘Should the employee or his [or her] dependents secure a recovery from [a third party], whether by judgment, settlement or otherwise, such employee or dependents may apply on notice to such lienor to the court in which the [tort] action was instituted, or to a court of competent jurisdiction if no action was instituted, for an order apportioning the reasonable and necessary expenditures, including attorney's fees, incurred in effecting such recovery. Such expenditures shall be equitably apportioned by the court between the employee or his [or her] dependents and the lienor’ ” (internal citations and footnote omitted).
The purpose of the 1975 amendment was to “ensur[e] that a [workers'] compensation carrier assumes its fair share of the costs of litigation,” thereby preventing a carrier that will benefit from an employee's recovery in a tort action from avoiding the costs incurred in obtaining the recovery (id. at 138, 468 N.Y.S.2d 850, 456 N.E.2d 791).
Workers' Compensation Law § 29(1) requires the equitable apportionment of litigation expenses (including attorneys' fees) incurred in securing a recovery; it says nothing, however, about the apportionment of settlement proceeds. Thus, “[a] court [i]s without authority to arbitrarily divide [a] proposed settlement amount equally between [a] plaintiff, plaintiff's counsel and [a workers' compensation carrier], or to strike, waive or reduce any portion of [the carrier's] lien, beyond its share of the litigation expenses, including attorney's fees, so that plaintiff c[an] recover more” (Fernandez v. Toyota Lease Trust, 156 A.D.3d 435, 435, 64 N.Y.S.3d 553 [1st Dept. 2017]; see Battista v. Dong Zhu Wu, 59 Misc. 3d 1203[A], 2018 WL 1404955 [Supreme Court, Bronx County 2018, Brigantti, J.]; see also Hammer v. Turner Constr. Corp., 39 A.D.3d 705, 833 N.Y.S.2d 633 [2d Dept. 2007] ).
In light of the language of Workers' Compensation Law § 29(1) and the First Department's decision in Fernandez, plaintiff's contention that the court can direct that the settlement proceeds be divided into thirds and distributed equally to plaintiff, plaintiff's counsel and The Hartford is without merit (see Battista v. Dong Zhu Wu, supra).5
The court declines to grant affirmative relief to The Hartford, which requests but did not formally move or cross-move for an order setting the carrier's adjusted lien based on a $90,000 settlement at $59,054.48 and declaring that lien valid. Putting aside any potential procedural issues in granting The Hartford affirmative relief, the court cannot determine the carrier's equitable share of the costs of the litigation. The Hartford arrived at the $59,054.48 adjusted lien amount by subtracting from the $90,000 settlement amount the plaintiff's attorneys' fee (which The Hartford represents is one-third of the settlement amount) and the amount of disbursements plaintiff made in bringing and prosecuting the action (see aff. in opp., at 11; memo. of law, at p 4). The Hartford's calculation, which appears to result in The Hartford assuming all of the expenditures (including attorneys' fees) incurred in obtaining the settlement, may be correct. But the court was not informed of the precise attorneys' fee that would be generated by the settlement and was not provided with information relating to the amounts of the other expenditures incurred by plaintiff in bringing and prosecuting the action. Therefore, the court cannot accurately gauge the adjusted lien amount.
Assuming the parties are unable to resolve the disputed lien amount, either party may make a new application for relief under Workers' Compensation Law § 29(1) on proper papers.
Accordingly, it is hereby ordered that plaintiff's motion is denied.
This constitutes the decision and order of the court.
1. Defendant's liability coverage apparently has a $100,000 limit.
2. It is not obvious to the court how The Hartford arrived at this precise figure (see this decision and order infra ).
3. “Failure to obtain the consent of the compensation carrier to the settlement of a [tort] action or a compromise order from the court in which the action is pending bars further payments of compensation. This rule protects carriers from their claimants' imprudent settlements and ensures the priority of a carrier's compensation lien. A carrier is not required to forfeit this protection in order to contest the legitimacy of a claimant's application for benefits” (Daly v. Michael Daly Const. Corp., 136 A.D.2d 798, 799, 523 N.Y.S.2d 627 [3d Dept. 1988] [internal citations omitted] ).
4. Workers' Compensation Law § 29(5) provides that “The petition shall contain the following: a. The name and residence of the petitioner if the employee, or petitioner's relationship to the deceased; b. The date of accident and a general description thereof; c. The nature and extent of the damages sustained, including the name of the physician or physicians attending or consulting in the treatment and the medical expenses incurred, the period of disability resulting from the accident, the total amount of wages lost thereby, and the present physical condition; d. The terms of the attorney's retainer and of the proposed settlement and petitioner's approval thereof; and e. Whether any previous application for the settlement of the claim has been made, and if so, the time and the court or justice thereof and the disposition made of same. “The affidavit of the attorney shall set forth by whom, on what date and under what terms he [or she] was retained, the services rendered by him [or her], his [or her] fee if the settlement is approved, the acts complained of, the terms of the proposed settlement with a statement of his [or her] reasons for recommending the same, and shall state that he [or she] has not become concerned in the application or its subject matter at the instance of such defendant directly or indirectly and that he [or she] has not received and is not to receive any compensation from such defendant directly or indirectly. “The affidavit of the physician in a claim arising from personal injury to the employee, shall set forth his [or her] connection with the case; the period covered by the treatment and the nature, duration and extent of the injuries; the date of his [or her] last examination and the condition of the employee at that time; whether or not the employee is still suffering any disability or inconvenience as the result of the injury, giving the details thereof; whether or not the accident has left the employee with any permanent disability, defect, scar or impairment; the cost of the treatment and whether or not he [or she expects to be paid or has been paid by the defendant or by anyone acting on the defendant's behalf. Where the affidavit as to the present condition is not made by the attending physician, the latter's affidavit setting forth the character of the injuries and treatment should also be attached, or the failure to obtain it explained.”
5. Of course, the parties are free resolve the matter between themselves and agree on the amount of the carrier's lien, which amount may be different from the amount that would be yielded upon the court's application of Workers' Compensation Law § 29(1) and Kelly and its progeny.
John R. Higgitt, J.