Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-88-01426/USCOURTS-ca10-88-01426-0/pdf.json

Nature of Suit Code: 360
Nature of Suit: Other Personal Injury
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

ROY JOSEPH VERONIE, 

Plaintiff, 

and 

FIRST SOUTHERN INSURANCE COMPANY, 

Plaintiff-intervenor-Appellant, 

v. 

TONY GARCIA, Individually and 

d/b/a TONY'S PAINT AND BODY SHOP, INC., 

a New Mexico Corporation, 

Defendant-Appellee. 

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FILE.D 

Ut1ited States Court of Appeals 

Tenth Cir.:.d: 

JUL 0 3 1989 

ROBERT L. HOECKER 

Clerk 

No. 88-1426 

Appeal from the United States District Court 

for the District of New Mexico 

(D.C. No. 85-0032JC) 

Gregory Biehler of Beall, Pelton, O'Brien & Brown, Albuquerque, 

New Mexico (Kevin M. Brown on the brief), for IntervenorAppellant. 

Paula J. Cotitta of Dines & Mccary, Albuquerque, New Mexico (Jim 

Dines of Dines & Mccary, Albuquerque, New Mexico with her on the 

brief), for Defendant-Appellee. 

Before MOORE, BARRETT, and EBEL, Circuit Judges. 

EBEL, Circuit Judge. 

Appellate Case: 88-1426 Document: 01019743425 Date Filed: 07/03/1989 Page: 1 
The issue presented in this case is whether a Louisiana 

workers' compensation reimbursement statute, La. Rev. Stat. Ann. 

23:1102(c) (1983), violates the due process clause or the equal 

protection clause of the Fourteenth Amendment of the United States 

Constitution. We find that the statute violates neither clause. 

We reverse and remand. 

FACTS 

The facts in this case are undisputed. On September 1, 1983, 

plaintiff Roy Joseph Veronie ("Veronie"), a teamster, sustained a 

severe work-related injury when he fell while climbing into the 

cab of a truck when the grab handle broke off. Veronie submitted 

a workers' compensation claim to his employer's workers' 

compensation carrier, First Southern Insurance Company ("First 

Southern"), pursuant to which First Southern paid $134,964.33 in 

compensation and medical benefits. 

On January 9, 1985, Veronie filed suit in the United States 

District Court for the District of New Mexico against appellee 

Tony Garcia d/b/a Tony's Paint and Body Shop, Inc. ("Garcia"), who 

had repaired the grab handle that broke loose. The complaint 

alleged that Garcia was liable for Veronie's injuries on the 

grounds that Garcia negligently repaired the grab handle, which 

negligence proximately caused injuries to Veronie. 

Pursuant to La. Rev. Stat. Ann. 23:1102(a) (1983), 1 First 

1 La. Rev. Stat. Ann. 23:1102(a) (1983) provides: 

If either the employee or his dependent or the 

employer or insurer brings suit against a third party as 

[continued on next page •.. ] 

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Appellate Case: 88-1426 Document: 01019743425 Date Filed: 07/03/1989 Page: 2 
Southern intervened in the litigation alleging that, under the 

Louisiana Workers' Compensation Law, 2 it was entitled to recover 

any compensation and medical benefits that it had already paid to 

Veronie. 

Garcia subsequently settled Veronie's claim against him for 

$12,000 without First Southern's approval. Veronie and Garcia 

submitted to the district court a joint motion to dismiss 

Veronie's claim with prejudice based on their settlement, and the 

district court granted that motion on February 3, 1987. 

On March 25, 1987, First Southern filed a motion for summary 

judgment against Garcia for reimbursement of all benefits that 

First Southern had previously paid to Veronie, pursuant to La. 

Rev. Stat. Ann. 23:1102(c) (1983), which provides: 

If the third party defendant or his insurer fails 

to obtain written approval· of the compromise from the 

employer or his insurer at the time of or prior to such 

compromise, and the employee fails to pay to the 

employer the total amount of compensation benefits, 

medical benefits, attorney's fees, and penalties out of 

the funds received as a result of the compromise, the 

third party defendant or his insurer shall be required 

to reimburse the employer or his insurer to the extent 

of the total amount of compensation benefits, medical 

benefits, attorney's fees, or penalties previously paid 

to or on behalf of the employee to the extent said 

amounts have not been previously paid to the employer by 

the employee pursuant to the provisions of Subsection B 

of this Section. 

[ ••• continued from preveious page] 

provided in R.S. 23:1101, he shall forthwith notify the 

other in writing of such fact, and of the name of the 

court in which the suit is filed, and such other may 

intervene as a party plaintiff in the suit. 

(Emphasis added.) 

2 La. Rev. Stat. Ann. 23:1101 et~ (1983). 

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Appellate Case: 88-1426 Document: 01019743425 Date Filed: 07/03/1989 Page: 3 
First Southern argued in support of its motion for summary 

judgment that it was entitled to judgment against Garcia "because 

of his failure to obtain written approval of the settlement from 

First Southern and the failure of Veronie to pay to First Southern 

the total amount of compensation benefits he received from the 

settlement." Memorandum in Support of Plaintiff in Intervention's 

Motion·for Summary Judgment, p. 2. 

Garcia argued in response that La. Rev. Stat. Ann. 23:1102(c) 

(1983) is unconstitutional because it deprives him of property 

without any hearing or determination of liability. Memorandum in 

Response to Intervenor's Motion for Summary Judgment, p. 11-13. 

The district court agreed with Garcia, and, on November 25, 1987, 

denied First Southern's motion for summary judgment on the grounds 

that La. Rev. Stat. Ann. 23:1102(c) (1983) ''is unconstitutional in 

that it violates the constitutionally guaranteed due process 

procedures of the employees and third parties therein." Order 

Denying Intervenor's Motion for Summary Judgment, p. 2. In its 

order, the district court also stated that "an immediate appeal 

from the Order may materially advance the ultimate termination the 

litigation." Id. First Southern subsequently petitioned this 

court for permission to appeal pursuant to 28 u.s.c. § 1292(b), 

which permission was granted. 

PROCEDURAL DUE PROCESS 

The first issue on appeal is whether La. Rev. Stat. Ann. 

23:1102(c) (1983) violates the procedural due process guarantees 

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Appellate Case: 88-1426 Document: 01019743425 Date Filed: 07/03/1989 Page: 4 
of the.Fourteenth Amendment. 3 Garcia argues that section 

23:1102(c) violates the procedural due process because it allows 

First Southern to obtain a money judgment in the amount of 

$134,964.33 against him without a full trial on the merits as to 

Garcia's liability to Veronie. 4 

Garcia fails, however, to distinguish between the original 

tort claim brought against him by Veronie, which he settled for 

$12,000, and the statutory liability to First Southern that he 

incurred when he settled with Veronie without First Southern's 

approval. Garcia had the option of litigating his liability to 

Veronie for the underlying tort claim, but chose instead to settle 

it by payment to Veronie of $12,000 without first obtaining the 

required approval from First Southern. Garcia's culpability to 

Veronie is not relevant to the claim brought against him by First 

Southern because First Southern is not claiming derivatively 

through Veronie. Rather, First Southern's claim is that Garcia 

breached a separate duty owed to it -- a statutory duty not to 

settle a claim brought by an injured employee, such as Veronie, 

without first obtaining the consent of the workers' compensation 

insurer that has made unreimbursed payments to the employee. 

The elements of this statutory cause of action created by 

section 23:1102(c) are: (1) a settlement between the injured 

employee and the third-party tortfeasor; (2) lack of written 

3 The due process clause provides: "No state shall . • • deprive 

any person of life, liberty, or property, without due process of 

law • • " U.S. Const. amend. XIV, § l. 

4 It is undisputed on appeal that if First Southern should prevail 

under this statute, Garcia would be liable to First Southern for 

$134,964.33. 

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Appellate Case: 88-1426 Document: 01019743425 Date Filed: 07/03/1989 Page: 5 
approval of the settlement from the employer or insurer; and 

(3) failure of the employee to pay back to his employer or insurer 

the total amount of compensation benefits previously received by 

him from his employer or insurer. The statute imposes a duty on 

the third party tortfeasor not to make any settlement payments to 

the injured party until either he has obtained written approval 

from the employer or insurer, or the employee has reimbursed the 

employer or insurer all the funds previously received. If that 

duty is breached, the statute imposes liability on the third party 

tortfeasor for the full amount previously paid by the employer or 

insurer to the employee less any sums the employee has reimbursed 

to the employer or insurer. 

Pursuant to this statutory cause of action, before First 

Southern is entitled to a money judgment against Garcia, it must 

invoke the judicial process and prove the elements of the 

statutory cause of action. First Southern did just that by 

intervening in Veronie's action against Garcia and moving for 

summary judgment. At that point, Garcia had the opportunity to 

deny the allegations and defend his position on the merits. 

Accordingly, we find that section 23:1102(c) does not violate the 

due process clause of the Fourteenth Amendment. 

EQUAL PROTECTION 

The second issue on appeal is whether La. Rev. Stat. Ann. 

23:1102(c) (1983) violates the equal protection clause of the 

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Appellate Case: 88-1426 Document: 01019743425 Date Filed: 07/03/1989 Page: 6 
Fourteenth Amendment. 5 Garcia argues that even if section 

23:1102(c) does not violate his right to due process, we should 

affirm the district court's decision because the statute gives 

employers and their insurers favored treatment under the law at 

the expense of employees and third party tortfeasors.6 

In the absence of a suspect class or fundamental interest, 

legislation that is challenged as denying equal protection will be 

sustained if the classification drawn by the legislation is 

rationally related to a legitimate state interest. Pennell v. 

City of San Jose, U.S. , 10 8 S • Ct. 8 4 9 , 8 5 9 , 9 9 L • Ed . 1 

(1988). The rational relationship standard of review reflects the 

Supreme Court's position that courts do not sit as superlegislatures and will not strike down state laws because they may 

seem unwise, improvident, or contrary to a particular school of 

thought. Cf. Ferguson v. Skrupa, 372 U.S. 726, 731-32 (1963). In 

short, in the realm of economic legislation, "it is only the 

invidious discrimination, the wholly arbitrary act, which cannot 

stand consistently with the Fourteenth Amendment." New Orleans v. 

Dukes, 427 U.S. 297, 304 (1976). 

In enacting section 23:1102(c), the Louisiana legislature 

overruled the jurisprudentially established rule in Verbois v. 

Howard, 322 So. 2d 110 (La. 1975), and Crabtree v. Bethlehem Steel 

5 The equal protection clause provides: "No state shall ••. deny 

to any person within its jurisdiction the equal protection of the 

laws." U.S. Const. amend. XIV, §1. 

6 Although Garcia did not argue before the district court that the 

statute violates the equal protection clause, he did raise it in 

his answer brief, and First Southern addressed it in its reply 

brief without objection on the grounds it was not addressed before 

the district court. 

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Appellate Case: 88-1426 Document: 01019743425 Date Filed: 07/03/1989 Page: 7 
Corp., 284 So. 2d 545 (La. 1973), that although an intervening 

employer could obtain preference in the apportionment of damages 

received by an employee through a judgment, he could receive no 

credit for sums received by the employee through a compromise. 

Babin v. Saturn Engineering Corp., 501 So. 2d 857, 860 (La. App. 

1987). Section 23:1102(c) appears to be rationally related to a 

number of legitimate state interests: it adjusts the economic 

burdens within the workers' compensation arena; it promotes the 

employer's or insurer's substantial economic interest in the 

litigation between the e~ployee and the third-party tortfeasor; 

and it promotes judicial economy by encouraging all interested 

parties to participate in settlement negotiations. Cf. Babin, 501 

So. 2d at 860-61. 

While we recognize that section 23:1102(c) imposes a harsh 

penalty on third party tortfeasors who settle without employer or 

insurer approval, the purposes behind the statutory right of 

reimbursement are legitimate ends of government, and section 

23:1102(c) is rationally related to those ends. Therefore, we 

hold that section 23:1102(c) does not violate the equal protection 

clause of the Fourteenth Amendment. 

CONCLUSION 

We conclude that La. Rev. Stat. Ann. 23:1102(c) (1983) is 

constitutional under the Fourteenth Amendment guarantees of 

procedural due process and equal protection. Accordingly, we 

REVERSE the district court's decision and REMAND for consideration 

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Appellate Case: 88-1426 Document: 01019743425 Date Filed: 07/03/1989 Page: 8 
of the merits of First Southern's claim against Garcia under 

section 23:1102(c). 

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