In the

United States Court of Appeals

For the Seventh Circuit

Nos. 06-1652, 06-1782, 06-1783, 06-1793,

06-1794, 06-1795 & 06-1796

MILLARD BALTZELL and RUTH ANN BALTZELL,

Plaintiffs-Appellees,

Cross-Appellees,

v.

R&R TRUCKING CO., FREIGHTLINER CORP., and

LUFKIN INDUSTRIES, INC.,

Defendants-Third Party Plaintiffs-Appellees,

Cross-Appellants,

v.

THE ENSIGN-BICKFORD CO.,

Third Party Defendant-Appellant,

Cross-Appellee.

Appeals from the United States District Court 

for the Southern District of Illinois.

No. 02 C 4058—G. Patrick Murphy, Judge.

ARGUED SEPTEMBER 14, 2007—DECIDED FEBRUARY 4, 2009
2 Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al.

Before BAUER, EVANS, and WILLIAMS, Circuit Judges.

WILLIAMS, Circuit Judge. Millard “Skeeter” Baltzell was

critically injured when he was crushed by a tractor-trailer

while working for The Ensign-Bickford Company. Skeeter

sought workers’ compensation from Ensign, and along

with his wife Ruth Ann, brought strict liability claims

against three companies—R&R Trucking Company, the

owner of the tractor-trailer; Freightliner Corporation, the

tractor manufacturer; and Lufkin Industries, Inc., the

trailer manufacturer. These defendants then sought

contribution by filing third-party claims against Ensign.

The Baltzells prevailed before a jury, which found the

defendants and Ensign collectively liable for $13,980,120.

Ensign then moved to dismiss the contribution claims

against it in exchange for waiving a statutory lien that it

had on the Baltzells’ recovery from the defendants. The

district court denied Ensign’s motion and entered judgment against the defendants and Ensign. We conclude

that the Illinois Workers’ Compensation Act and the

Illinois Supreme Court’s decision in LaFever v. Kemlite

Co., 706 N.E.2d 441, 452 (Ill. 1998) require us to vacate

the court’s judgment and remand for further proceedings consistent with this opinion.

I. BACKGROUND

A. Workers’ compensation in Illinois

Before delving into the facts of this case, we first provide

some background on the somewhat complicated
Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al. 3

statutory scheme at issue here. Like other states, Illinois

has a workers’ compensation system in which employers

compensate their employees for job-related injuries or

illnesses, regardless of fault. See Illinois Workers’ Compensation Act (“IWCA”), 820 Ill. Comp. Stat. 305/1 et seq.

In return for not having to prove fault, employees

receive only workers’ compensation benefits from their

employers and cannot sue their employers to receive

more damages. See id. at 305/5(a). This rule also bars loss

of consortium claims that employees’ spouses might

otherwise bring against employers. Id. (extending bar

to “any one otherwise entitled to recover damages for

such injury”); Vickery v. Westinghouse-Haztech, Inc., 956

F.2d 161, 162 (7th Cir. 1992) (“[T]he [Illinois] Workers’

Compensation Act has been consistently interpreted to

bar suits for loss of consortium by a covered worker’s

spouse . . . .” (citing Dobrydnia v. Ind. Group, Inc., 568

N.E.2d 1002 (Ill. App. Ct. 1991))).

Sometimes, however, parties other than an employer

might cause an employee to be injured at work. An employee in this situation can sue these third parties for

damages. See 820 Ill. Comp. Stat. 305/5(b) (“Where the

injury or death for which compensation is payable

under this Act was caused under circumstances creating

a legal liability for damages on the part of some person

other than his employer to pay damages, then legal

proceedings may be taken against such other person to

recover damages notwithstanding such employer’s payment of or liability to pay compensation under this Act.”).

These third parties can in turn seek contribution from
4 Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al.

the employer, thereby pulling the employer into the suit.

Id. Alternatively, an employer may choose to exercise

its right to intervene in the suit before satisfaction of

judgment. See Ins. Co. of N. Am. v. Andrew, 564 N.E.2d 939,

941 (Ill. App. Ct. 1990).

Now suppose an employee ends up recovering money

from a third party for a work-related injury. That would

imply the employer was not solely responsible for the

accident. So Illinois law gives the employer a lien on

any recovery that an employee obtains from a third

party for a work-related injury. 820 Ill. Comp. Stat.

305/5(b). An employer who exercises this lien gets first

crack at any recovery the employee gets from the third

party. Id. (“[F]rom the amount received by such employee or personal representative [from a third party]

there shall be paid to the employer the amount of compensation paid or to be paid by him to such employee

or personal representative . . . .”).

To calculate the amount of the employer’s lien, one

begins with the recovery that the employee receives

from the lawsuit and then reduces this value “by an

amount equal to the amount found by the trier of fact to

be the employer’s pro rata share of the common liability

in the action.” Id. The amount of the employer’s lien

cannot exceed its total workers’ compensation obligation.

Here are some examples to help illustrate how this calculation works:
Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al. 5

Although not raised by the parties in this appeal, the IWCA 1

also provides that any reimbursement that an employer receives

when exercising its lien is reduced by: (1) the employer’s

pro rata share of the employee’s costs and reasonably necessary

expenses in bringing the suit, and (2) 25% of the employee’s

attorney fees. See 820 Ill. Comp. Stat. 305/5(b). These cost- and

fee-sharing provisions make sense—because the employer

has cashed in on the employee’s suit (by exercising the lien and

effectively reducing its workers’ compensation obligation), the

statute requires the employer to chip in for the expense of the

suit.

Workers’

comp.

obligation

Total

recovery

from

suit

% fault

of employer

Employer’s

pro rata

liability

Employer’s

lien1

$2 M $5 M 0% $0 $2 M

$2 M $5 M 8% $400 K $2 M

$2 M $2 M 25% $500 K $1.5 M

$2 M $1 M 40% $400 K $600 K 

$2 M $1 M 60% $600 K $400 K

$2 M $5 M 60% $3 M $2 M

As the last entry in the chart shows, sometimes an

employer’s pro rata liability might exceed its workers’

compensation obligation. This is problematic because

Illinois law seeks to protect employers from paying more

than what workers’ compensation requires.
6 Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al.

To avoid this difficulty, the Illinois Supreme Court has

provided employers with two different ways to curtail

their contribution liability. First, Illinois law caps an

employer’s contribution liability at “an amount not

greater than the [employer’s] workers’ compensation

liability.” Kotecki v. Cyclops Welding Corp., 585 N.E.2d 1023,

1028 (Ill. 1991). This value, which is generally referred to

as the “Kotecki cap,” represents the maximum amount

that an employer has to pay in contribution.

Despite the protection that Kotecki provides, however,

some employers might still prefer to pay workers’ compensation rather than contribution. For example, a contribution judgment would probably require an employer

to make a lump sum payment up front; workers’ compensation, on the other hand, often includes a component

that is paid out over many years. Even if the lump sum

payment is discounted to account for lost investment

opportunities, it might not be properly indexed for inflation, which implicitly decreases the cost of future payments. Moreover, because the total cost of workers’

compensation often depends on how long the injured

employee survives, an employer might prefer workers’

compensation if it believes the employee will die sooner

than expected. (The flip side is that an employer may

end up paying more in workers’ compensation than in

contribution if the employee lives longer than expected.)

So Illinois law provides employers with a second

option—an employer can escape contribution liability

altogether by waiving its lien on an employee’s recovery

from third parties. See LaFever, 706 N.E.2d at 454. An
Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al. 7

employer who takes this option can no longer share in

damages that the employee recovers from a third party.

However, the employer can then be certain that its

only payment obligation will arise under workers’ compensation.

B. Factual background

Skeeter Baltzell worked for Ensign, a manufacturer of

caps and boosters for explosives, at a facility in Union

County, Illinois. He helped load specialized tractor-trailers

that hauled explosives away from the Ensign facility. R&R

Trucking had a contract with Ensign to provide these

tractor-trailers along with the drivers, helpers, and equipment necessary to load and unload the trailers.

On May 22, 2000, an Ensign employee backed an R&R

tractor-trailer into Skeeter, crushing him between the

trailer and a loading dock. The Freightliner tractor and

Lufkin trailer that were involved in the accident were

not equipped with a back-up alarm.

Skeeter was terribly injured. His pelvis was severely

fractured and his bladder and lower intestinal tract were

crushed. Because of his injuries, Skeeter suffered deep

vein thrombosis, a heart attack, respiratory failure, and a

stroke that left him brain damaged and partially paralyzed.

Skeeter still needs constant care and attention from his

wife, Ruth Ann, as he has a permanent colostomy, must

be catheterized to urinate, and has cognitive difficulties.

Skeeter filed a claim before the Illinois Workers’ Compensation Commission (IWCC) seeking workers’ compen-
8 Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al.

The district court properly exercised diversity jurisdiction 2

over Skeeter and Ruth Ann’s claims. See 28 U.S.C. § 1332(a).

Skeeter and Ruth Ann were citizens and residents of Illinois,

whereas R&R, Freightliner, and Lufkin were incorporated in

Missouri, Delaware, and Texas, respectively, and had their

principal places of business in Missouri, Oregon, and Texas,

respectively. The amount in controversy exceeded $75,000.

Similarly, the court had supplemental jurisdiction over the

contribution claims against Ensign, a Connecticut corporation

with its principal place of business in Connecticut. See id. § 1367.

sation benefits from Ensign. Skeeter and Ruth Ann also

filed this suit in federal court, alleging strict liability claims

under Illinois law for personal injury and loss of consortium, respectively, against R&R, Freightliner, and Lufkin

(collectively, the “defendants”). The defendants then

filed third-party contribution claims against Ensign.2

On April 21, 2005, a jury returned a verdict in favor

of Skeeter for $11,980,120, and in favor of Ruth Ann

for $2,000,000, which resulted in a total judgment of

$13,980,120. The jury apportioned fault as follows:

Skeeter Baltzell, 0%; Freightliner, 20%; Lufkin, 10%; R&R,

40%; and Ensign, 30%. Accordingly, Ensign was liable to

Skeeter and Ruth Ann for $13,980,120 * .30 = $4,194,036.

Illinois law limited Ensign’s contribution liability to

the present cash value of its total workers’ compensation

obligation (i.e., its Kotecki cap). But the IWCC hadn’t

yet finally determined what Ensign’s total workers’

compensation liability would be, so the district court

required Ensign to submit an estimate of this amount.

Ensign submitted documentation that its Kotecki cap was
Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al. 9

As required by Illinois law, this calculation implicitly reappor- 3

tioned to the defendants the difference between the liability

assessed by the jury against Ensign ($4,194,036) and the

Kotecki cap amount ($4,085,571.21). See Ill. Tool Works, Inc. v.

Indep. Mach. Corp., 802 N.E.2d 1228, 1232 (Ill. App. Ct. 2003).

$4,085,571.21, and that it had already paid $873,953.31

in workers’ compensation to the Baltzells. Neither the

defendants nor the Baltzells disputed these values, which

the district court proceeded to adopt.

Ensign then moved to waive its lien on the Baltzells’

recovery and to dismiss the defendants’ third-party

contribution claims. On October 4, 2005, the district court

denied this motion, reasoning that “[a]llowing EnsignBickford to waive its lien now would more than partially

frustrate the purpose of the Contribution Act, and it

would do nothing to promote the purposes of the workers’

compensation statute.” The court then reduced the total

judgment of $13,980,120 by the amount that Ensign

would pay (the Kotecki cap amount of $4,085,571.21), which

left the remaining $9,894,548 in damages to be split

among the three defendants based on their respective

share of the liability. For example, R&R was liable for 3

40% of the total damages, and the three defendants were

liable for 70% of the total damages, so R&R’s share was

40%/70% = 57.142857% of the cumulative liability for

the three defendants, thereby making R&R liable for

$9,894,548 * .57142857 = $5,654,027. Similarly, the court

found Freightliner liable for $2,827,013, and Lufkin liable
10 Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al.

for $1,413,506. The court entered judgment in favor of

the Baltzells in these amounts.

Ensign then filed various post-judgment motions,

including another motion to waive its workers’ compensation lien and dismiss the third-party contribution claims

against it. Meanwhile, the Baltzells and the defendants

entered a settlement agreement in which the defendants

agreed to pay their respective pro rata shares of the

judgment but reserved their right to litigate contribution

and setoff issues.

On February 13, 2006, the district court denied Ensign’s

post-judgment motions, setting the stage for Ensign’s

current appeal. The defendants also filed related

cross/contingent appeals regarding setoff and contribution

issues in the event that we vacated the judgment entered

against Ensign.

II. ANALYSIS

A. Ensign was entitled to waive its workers’ compensation lien and the contribution claims against it

should have been dismissed.

Because this is a diversity case governed by Illinois law,

we must resolve this matter how we think the Illinois

Supreme Court would. See Allstate Ins. Co. v. Menards, Inc.,

285 F.3d 630, 637 (7th Cir. 2002). If there is no prevailing

authority from that court, we give great weight to the

holdings of the Illinois appellate courts. Id.
Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al. 11

The primary precedent at issue here is the Illinois

Supreme Court’s decision in LaFever v. Kemlite Co, 706

N.E.2d 441 (Ill. 1998). Similar to this case, the employee

in LaFever suffered a workplace injury and sued a third

party, who in turn sued the employer for contribution.

After a jury found that both the third party and the employer were liable, the trial court permitted the employer

to waive its workers’ compensation lien and have the

contribution claim against it dismissed. Id. at 444-46. The

Illinois Supreme Court approved of the trial court’s

decision and held that an employer can wait and see how

a jury verdict goes before deciding whether to waive

its lien. Id. at 453 (noting that nothing in 820 Ill. Comp. Stat.

305/5(b) “required [the employer] to waive the lien by a

date certain”).

Here, the district court did not allow Ensign to waive

its lien because it felt that allowing a post-verdict waiver

would “more than partially frustrate the purpose of the

Contribution Act.” We understand the court’s apparent

belief that it would be unfair to allow a post-verdict

waiver, given that Ensign decided to waive the lien only

after the jury found it to be significantly liable for the

accident. (Presumably Ensign would not have waived

the lien if the jury had instead found it minimally liable

or not liable at all.) But LaFever required the district

court to grant Ensign’s late waiver. Indeed, LaFever expressly indicated that an employer can engage in this

kind of strategic decisionmaking. Id. (noting there was

nothing unfair in the employer’s strategy of waiting

until after trial to waive its lien and stating that the

court was “reluctant to dictate trial strategy to any
12 Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al.

litigant when that strategy is entirely consistent with

controlling statutes and prior decisions of this court”).

Still, the Baltzells and the defendants contend that

LaFever is distinguishable from this case. In LaFever, the

employer had already paid out the workers’ compensation

benefits that it owed the employee and it was not

required to make any future payments. By contrast, Ensign

estimates that it still owes about $3 million in future

workers’ compensation payments to the Baltzells.

Illinois courts, however, have never suggested that

we should distinguish between paid and future benefits

when deciding whether an employer can waive its workers’ compensation lien. Indeed, Illinois law is clear that

an employer’s lien encompasses both paid and future

workers’ compensation benefits. For example, the IWCA

states that from the money the employee receives from

a third-party suit, “there shall be paid to the employer

the amount of compensation paid or to be paid by him to

such employee.” 820 Ill. Comp. Stat. 305/5(b) (emphasis

added). And the LaFever court itself noted that an “employer may claim a lien on the worker’s recovery, in

an amount equal to the amount of workers’ compensation

due the worker.” LaFever, 706 N.E.2d at 451 (emphasis

added); see also Ramsey v. Morrison, 676 N.E.2d 1304, 1313

(Ill. 1997) (noting that the workers’ compensation lien

is “equal to the amount of the workers’ compensation

benefits paid or owed.” (emphasis added)); cf. Zuber v. Ill.

Power Co., 553 N.E.2d 385, 386 (Ill. 1990) (noting that

“reimbursement” to an employer “may take the form of a

lien, on past payments of compensation, or a credit, on

future payments”).
Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al. 13

Moreover, Illinois courts have allowed employers to

waive their liens even when they owed future payments.

See generally Branum v. Slezak Constr. Co., Inc., 682 N.E.2d

1165 (Ill. App. Ct. 1997) (not questioning a trial court’s

decision to permit an employer to waive its lien even

though the employer still owed workers’ compensation).

For example, in Kim v. Alvey, Inc., 749 N.E.2d 368, 372,

377 (Ill. App. Ct. 2001), an Illinois appellate court indicated

that a trial court properly allowed an employer to waive

its lien in a post-trial motion, even though the amount of

its workers’ compensation obligation (and hence, the

value of the lien) had not yet been determined.

Similarly, we conclude that the district court should

have allowed Ensign to waive its lien on the Baltzells’

recovery in their lawsuit against the defendants. Thereafter, the court should have dismissed the contribution

claims against Ensign.

B. The defendants are entitled to a setoff for the

workers’ compensation benefits that Ensign has

already paid.

Given that Ensign is not liable for contribution (but still

owes workers’ compensation), we next determine

whether the defendants are entitled to a setoff that

reduces their liability. Once an employer waives its lien,

an employee who has received workers’ compensation

benefits will never have to repay the employer for those

benefits, even if the employee recovers damages from

third parties for the same injury. In such a situation,

Illinois courts award a setoff that reduces the liability of
14 Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al.

While the plaintiffs and defendants both tacitly agreed to the 4

Kotecki cap amount that Ensign submitted (which was Ensign’s

estimate of its workers’ compensation obligation), the parties

never agreed to a setoff value. See R&R Br. at 31 n.6; R. 457, Ex.

A; see also Branum, 682 N.E.2d at 1177 (“No workers’ compensation adjudication is made within a contribution case . . . when a

(continued...)

third parties by whatever amount of workers’ compensation benefits the employee has already received. See, e.g.,

Branum, 682 N.E.2d at 1178-79. The rationale behind this

rule is simple—a plaintiff who has already received workers’ compensation from an employer should not get a

double recovery from a third party for the same injury.

See Wilson v. Hoffman Group, Inc., 546 N.E.2d 524, 530-31

(Ill. 1989). So the defendants here are entitled to a setoff

for any workers’ compensation benefits that the Baltzells

have already received from Ensign.

This does not mean, however, that a setoff is proper

for future workers’ compensation benefits whose value

has yet to be determined. As far as we know, the IWCC,

which is in charge of determining workers’ compensation

awards, has yet to issue a final determination on the

award that the Baltzells will receive for the accident. And

an Illinois appellate court has indicated that we should

not try to divine what that award will be. See Branum,

682 N.E.2d at 1178-79. We follow that court’s lead and

conclude that it would be too speculative to award a

setoff for future workers’ compensation benefits when

we do not know how the IWCC will resolve the matter

and the parties have not stipulated to a setoff amount.4
Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al. 15

(...continued)

trial court determines the present cash value of future workers’

compensation benefits under Kotecki.” (citation omitted)).

See id. (“[A]bsent an agreement between all parties, a

setoff of workers’ compensation benefits cannot be

made until the amount of workers’ compensation

benefits to which plaintiff is entitled is fully determined.”);

see also Ocampo v. Paper Converting Mach. Co., No. 02 C

4054, 2005 WL 2007144, at *17-18 (N.D. Ill. Aug. 12, 2005)

(following Branum).

On remand, the district court should require the

parties to submit an update on the workers’ compensation

payments that have been made and on the status of the

proceedings before the IWCC. The court should also

impose a setoff equal to the paid benefits that the

Baltzells have already received from Ensign.

Regarding future benefits, we also note that the most

efficient solution might be for all the parties to agree

that any future workers’ compensation payments that

the Baltzells receive from Ensign will be held in trust and

distributed to the defendants according to their pro rata

liability. See Pekin Ins. Co. v. Hiera, 840 N.E.2d 1236, 1239

(Ill. App. Ct. 2005) (approving of an insurance contract

that set forth this sort of procedure). The defendants

suggested that we could mandate this outcome, but it

is not clear whether we have the authority to do this and

at any rate, we decline to take this step given our uncertainty as to the final status of the matter before the IWCC.
16 Nos. 06-1652, 06-1782, 06-1783, 06-1793, et al.

III. CONCLUSION

The judgment of the district court is VACATED and the

case is REMANDED for further proceedings consistent with

this opinion.

2-4-09