### IN THE UNI TED STAT ES COURT OFAPPEALS FOR THE FIF TH CIRCU IT

No. 10-41152

JAMES EDWIN HODGES; BEVERLY HODGES, Plaintiffs - Appellees

v. INDIANA MILLS & MANUFACTURING INC.; ET AL,
Defendants ABF FREIGHT SYSTEM INC, Intervenor - Appellant

Appeal from the United States District Court for the Eastern District of Texas USDC No. 2:03-CV-183

Before JONES, Chief Judge, and STEWART and SOUTHWICK, Circuit Judges. PER CURIAM: * I. Background James Hodges was driving a truck for his employer, ABF Freight System, Inc. (“ABF”), when he was hit by anot h er vehicle and rendered paraplegic. U n i te d S ta te s C o u rt o f A p p ea l s

F i ft h C i rc u i t 

### F I L E D Novembe r 29, 20 11 Lyle W . Cayce Clerk

Pursua nt to 5 T H C IR

. R. 47.5 , the cour t has d ete rm inedt hat this op inion s houldnot * be publ ish ed and is not pr ece dent excep t unde r the lim ite d cir cum st ance s se t for th in 5 T H C IR

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Following the accident, ABF paid James workers’ compensation benefits. James and his wife Beverly Hodges sued various third parties, including the company that e m ployed the driver responsible for the accident, Indiana Mills & Manufacturing (“Indiana Mills”), and Mack Truc k s , I nc. (“Mack”). ABF intervened to pr o t e ct its subrogation rights for the workers’ compensation benefits it had paid (and continues to pay) to James. The Ho d g e s es settled with the other driver for $50,000. James’s suit against Indiana Mills and Mack alleged design defects in his truck’s seatbelt and door latch; Beverly’s suits alleged loss of consortium and loss of household services. James and Beverly settled with Indiana Mills for $700,000 each. Their claims against Mack went to trial, and a j u r y a w a rded James $7,910,553 in damages and Beverly $0 in damages. This court reversed that jury verdict and remanded for a new trial. See Hodges v. Mack Trucks (“Hodges I ”), 474 F.3d 188 (5th Cir. 2006). Before reaching a second trial, Mack settled with the Hodgeses, paying $3,075,000 to James, $800,000 to Beverly, and $475,000 to A B F f o r its already-stipulated compensation lien. The settlements totaled $5.8 million–$50,000 from the driver, $1.4 million from Indiana M i l l s , and $4.35 million from Mack. ABF requested that the district c o u r t apportion the total settlement recovery for the purpose of computing credit agai n st ABF’s obligation to pay future workers’ compensation benefits t o J ames. Following an

evi d e nti ary hearing, a magistrate judge allocated $1.16 million of the settl e m e nt to Beverly and $4.64 million to James. The district court adopted the magistrate judge’s report. AB F appeals this allocation, arguing that the district court erred in its apportionment. ABF also appeals the district court’s conclusion, upholding the

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magistrate judge’s report, that ABF waived its right to recalculation of the legal expenses it owed the Hodgeses, which ABF argues it overpaid prior to the final settlement. We reject the former appellate contention but agree with the latter

one. II. Standard of Review In insurance disputes arising under Texas law, “the pro p e r division of a settlement between beneficiaries and non-beneficiaries presents an issue for the trier of fact.” U.S. Fire Ins. Co. v. Hernandez , 918 S.W.2d 5 7 6 , 579 (Tex. App. 1996). Because the district court was the trier of fact in apportioning the settlement, this court reviews the d i s t r i ct court’s determination for clear

error. F E D

. R. C I V

. P. 52(a). A court of appeals must not reverse a finding of fact “[i]f the district court’s account of the evidence is plausible in light of the record viewed in i t s e ntirety[.]” Anderson v. City of Bessemer , 470 U.S. 564, 573-74 (1985) (citations omitted). However, as we explained in Hodges I , th i s c o u r t reviews the district court’s calculation of legal expenses to be deducted from a carrier’s recovery for abuse of discretion. 474 F.3d at 204; see also Erivas v . S t a t e Farm Mut. Auto. Ins. Co. , 141 S.W.3d 671, 676 (Tex. App. 2004). “A district court abuses its d i s c r e t i o n when its ruling is based on an erroneous view of the law or on a clearly erroneous assessment of the ev i d e n c e.” Arete Partners, L.P. v. Gunnerman , 643 F.3d 410, 412 (5th Cir. 201 1). III. Discussion A. Texas law requires that “the first money recovered by an injured worker from a tortfeasor [must] go t o t h e worker’s compensation carrier.” Texas Mut.

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Ins. Co. v. Ledbetter , 251 S.W.3d 31, 3 3 (Tex. 2008). When determining the

r e i mb u r s e m e nt o w e d t o a w o rkers’ compensation carrier as subrogation, th e tri e r of fact must allocate a settlement according to the relative merits and worth of the claims involved. U.S. Fire Ins. Co. v. Hernandez , 918 S.W.2d 576, 579 (Tex. App. 1996). Here, after an evidentiary hearing, the magistrate judge found that the Hodgeses’ claims were of equal merit, but that Beverly’s claims were worth approximately one-fourth as much as James’s. The magistrate judge heard extensive evidence regarding Beverly’s post-accident life and relationship with James a n d t h e care she provides to him. It also considered the previous jury verdict. While acknowledging that “there is no exact science for determining the relative worth of these claims, and reasonable minds may differ,” the magistrate judge concluded that James’s claims were w o r th approximately four times as much as Beverly’s. AB F c o nt e nds that this apportionment was clearly erroneous i n li ght o f th e first trial’s jury verdict, which awarded Beverly no damages. T h e c o u rt relied i n s t ead on evidence of Beverly’s loss of household damages and noneconomic damages for los s o f c onsortium. ABF argues that the allocation, based on the court’s “subjective evaluation” of Beverly’s damages, including her noneconomic damages, was arbi t r a ry. It urges that the objective evidence of the original vacated jury verdict, combined with actual economic damages paid out to James, dictates a contrary conclusion. But “arbitrary” is not the same as “subjective.” A district court is entitled to rely on subjective factors in its evaluation of evidence, and such reliance does not make its conclusion arbitrary. Evaluation of a claim for loss of consortium, in particular, depends on the tri al court’s evaluation of the mental and emotional

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(or “subjective”) injury incurred by s pouse-claimant, and Texas courts have upheld damage awards for consortium claims based on such evidence. See, e.g., Texas Workers’ Compensation Ins. Fund v. Serrano , 985 S

. W.2d 208, 211-12 (Tex. App. 1999) (declining to disturb trial court’s damages find i n g o n loss of consortium claims because “mental anguish damages are incalculable and can not logically be refuted because there are no objective facts by which to measure the amount.” ( citing Associated Indem. Corp. v. CAT Contracting, 918 S.W. 2 d 5 8 0, 602-603 (Tex. App. 1996))); N. Am. Refractory Co. v. Easter , 9 8 8 S.W.2d 904, 914 (Tex. App. 1999) (evidence of claimant’s “very c l o s e relationship” with her husband, “plans for their 50th wedding anniversary,” and her emotional and physical reaction to watching her husband’s health decline, was sufficient evidence to support the claimant’s loss of consortium award). This court will only overturn a finding as clearly erroneous if that finding is without adequate evidentiary support or is based on an erroneous view of the law. Pebble Beach v. Tour 18 , 156 F.3d 526 (5th Cir. 1998); Johnson v. Hospital Corp. , 95 F.3d 383, 395 ( 5 t h Cir. 1996). ABF, in fact, does not argue that the finding lacked adequate evidentiary support, but only that the vacated jury verdict should trump the district court’s eval uation of other evidence. We 1 conclude the r e w a s sufficient evidence in the record to support the district court’s finding that James’ claims were worth approximately four times as much as Beverly’s, and thus affirm its settlement allocation.

ABF argues that the allocat ion violat es Ledbe tter’s wa rning that “a car rier ’s right to 1 reim burs em ent is man dat ory. ” Ledbe tter , 251 S. W.3 d at 36. But to conc lude that the dis tri ct cour t infr inged on the car rier ’s right to sub rogat ion requ ires the pr ior conc lus ion that the tri al cour t err ed in its fac tual find ings regar ding the me rit a n d w o r t h o f the clai ms , beca use the car rier only has a right to reim burs em ent for the wo rke r’s por tion of the se ttl em ent. We mus t revie w thos e f

indi ngs forc learer ror . 5 Case: 10-41152 Document: 00511678860 Page: 5 Date Filed: 11/29/2011No. 10-41152 B. ABF a l s o argues that the district court abused its discretion when it refused to reconsider its o r d e r requiring ABF to pay $147,101.48 in legal expenses. Under Texas law, an insurance carrier whose interests are not actively represented by an attorney when a beneficiary files suit against a thirdp a r t y m u s t p a y l e g a l e x p e n s e s t o t h e b e n e f i c i a r y ’ s a t t o r n e y . T E X

. LA B

. C O D E § 417.003(a). If there is an agreement between the beneficiary’s attorney a n d t h e c arrier, then the agreement governs the amount of legal
expenses the carrier must pay. Id. If there is no agreement, the court will award reasonable attorney fees not to exceed one-third of the carrier’s recovery, id. at (a)(1), and a “proportionate share” of litigation expenses. Id. at (a)(2). In Hodges I

, this court instructed that “[o] n r e m an d , wh e n determining the total amount recovered by Hodges for use in calculating ABF’s pro-rata share of Hodges’ litigation costs, the district court should consider any verdict.” Hodges I , 474 F.3d at 206. The district cour t concluded that by settling the amount of its lien with Mack, ABF waived its right to have the court reconsider the award of fees and expenses pursuant to § 417.003(a) and reduce any overp a yment by ABF

. While § 417.003(a) provides that a court need not calculate legal expenses if there is an agreement between the beneficiary’s attorney and the carrier, here this is no such agreement. The settlement agreement between Mack and ABF expressly covered only ABF’s right to subrogation for benefits paid by ABF and released only its claims against Mack. Nothing about ABF’ s s ettlement with Mack prevented the court from recalculatin g t h e l egal expenses ABF could recoup.

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Because the district court’s ruling was legally erroneous, the court abused its discretion by refusing to recalculate its award of legal expenses against ABF. The amount of ABF’s proposed recalculation, $55,635.91, was offered (here and in the district court) without object i o n b y the Hodgeses, other than to ABF’s underlying interpretation of the parties’ settlement agreement with Mack. IV. Conclusion For the foregoing reasons, we AFFIRM the dist r i c t court’s settlement al l o cation pertinent to ABF’s reimbursement of benefits, VACATE the district court’s denial of A B F ’s claim for reimbursement of overpaid expenses, and REMAND for entry of judgment for $55,635.91 in favor of ABF. AFFIRMED in part, VACATED and REMANDED in part for entry of judgment.

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