Court Opinion

ID: 768157
Source: CourtListenerOpinion
Date Created: 2012-04-18 08:52:12+00
Date Added: 2024-06-11T17:55:33.403841
License: Public Domain

207 F.3d 1001 (7th Cir. 2000)
GEORGE P. JANSEN and THERESA JANSEN,    Plaintiffs-Appellees,v.AARON PROCESS EQUIPMENT COMPANY,  INC.,    Defendant/Third-Party Plaintiff-Appellee,v.LUXEMBOURG CHEESE FACTORY, INC., Third-Party Defendant-Appellant.
No. 99-1256
In the  United States Court of Appeals  For the Seventh Circuit
Argued October 26, 1999Decided March 29, 2000

Appeal from the United States District Court  for the Northern District of Illinois, Western Division.  No. 92 C 20386--Philip G. Reinhard, Judge.
Before HARLINGTON WOOD, JR., KANNE, and DIANE P. WOOD,  Circuit Judges.
HARLINGTON WOOD, JR., Circuit Judge.

1
In 1991, George Jansen ("Jansen") was severely injured at  work when a cheese blender he was cleaning began  operating when he was inside of it. As a result  of the accident, Jansen's employer, Luxembourg  Cheese Factory, Inc. ("Luxembourg"), through its  workers' compensation insurer Travelers Insurance  Company, paid Jansen $212,178.25 in workers'  compensation benefits. Jansen and his wife,  Theresa, filed a diversity negligence and  products liability suit in the Federal District  Court for the Northern District of Illinois  against the manufacturer of the cheese blender,  Aaron Process Equipment Company, Inc. ("Aaron  Process"). Aaron Process then filed a third-party  complaint against Luxembourg for contribution.

2
The jury returned a verdict for Jansen against  Aaron Process in the amount of $720,000. On the  contribution claims, the jury awarded judgment in  favor of Aaron Process against third-party  defendant Luxembourg, attributing 17% of the  fault to Aaron Process and 83% of the fault to  Luxembourg. These verdicts were affirmed on  appeal. Jansen v. Aaron Process Equip. Co., Inc.,  149 F.3d 603 (7th Cir. 1998). We now consider the  district court's ruling on Jansen's post-verdict  motion for attorney's fees and costs against Luxembourg pursuant to the Illinois Workers'  Compensation Act (the "Act"), 820 ILCS 305/1 et  seq.

I.  BACKGROUND

3
The facts of the underlying action are set  forth in our previous opinion, Jansen, 149 F.3d  603, and we will not restate them here.  Luxembourg paid Aaron Process $212,178.25  pursuant to the jury's verdict on the third-party  contribution claim.1 When Jansen received  payment in the amount of $720,000 from Aaron  Process, $212,178.25 of the amount was designated  to cover Luxembourg's workers' compensation lien  pursuant to section 5(b) of the Act ("section  5(b)"), 820 ILCS 305/5(b). Section 5(b) provides  that when a judgment is received from a third  party as a result of an injury for which workers'  compensation benefits are payable under the Act,  the recovering party must reimburse the employer  for any workers' compensation benefits already  received.

4
On August 3, 1998, Jansen's attorney filed a  motion for attorney's fees in the amount of  $53,044.56 and a pro rata share of costs in the  amount of $3,572.20 from Luxembourg pursuant to  section 5(b). Luxembourg filed a response to  Jansen's motion and a cross-motion to bar Jansen  from requesting attorney's fees under section  5(b). While the dispute over fees and costs was  pending, Jansen tendered a check for $212,178.25  to Luxembourg in exchange for payments from  Luxembourg covering the attorney's fees and costs  at issue which Jansen's attorney agreed to hold  in escrow until the dispute was settled. On  January 11, 1999, the district court granted  Jansen's motion for attorney's fees and costs in  the amount of $56,616.76. Luxembourg appeals.

II.  ANALYSIS

5
The Illinois Workers' Compensation Act allows an  injured worker who has received workers'  compensation from his employer to sue a third-  party tortfeasor. LaFever v. Kemlite Co., 706  N.E.2d 441, 451 (Ill. 1998). Under section 5(b)  of the Act, if the worker prevails in his  lawsuit, he must repay his employer for the  workers' compensation benefits from the amount  recovered, and the employer may claim a lien on  the recovery in an amount equal to the benefits  paid. Id. (citing 820 ILCS 305/5(b)). Section  5(b) further provides:

6
Out of any reimbursement received by the employer  pursuant to this Section, the employer shall pay  his pro rata share of all costs and reasonably  necessary expenses in connection with such third-  party claim, action or suit and where the  services of an attorney at law of the employee .  . . have resulted in or substantially contributed  to the procurement by suit, settlement, or  otherwise of the proceeds out of which the  employer is reimbursed, then, in the absence of  other agreement, the employer shall pay such  attorney 25% of the gross amount of such  reimbursement.

7
820 ILCS 305/5(b).

8
Luxembourg raises three challenges to the  district court order granting attorney's fees.2  Luxembourg first asserts that it is not liable  for the statutory fees because Jansen failed to  follow the notice provisions set out in section  5(b). Luxembourg next argues that an award of  attorney's fees is inappropriate because there  was not an attorney-client relationship between  the company and Jansen's attorney. Finally,  Luxembourg contends that its relationship with  Jansen's attorney created an "other agreement" as  set forth in section 5(b) which precludes the  recovery of statutory fees. Because Luxembourg's  arguments are based on alleged legal errors, we  review de novo. See, e.g., Khan v. Gallitano, 180  F.3d 829, 837 (7th Cir. 1999).

9
Under section 5(b), when an employee files an  action to recover damages from a third party,

10
he shall forthwith notify his employer by  personal service or registered mail, of such fact  and of the name of the court in which the suit is  brought, filing proof thereof in the action. The  employer may, at any time thereafter [sic] join  in the action upon his motion so that all orders  of court after hearing and judgment shall be made  for his protection.

11
820 ILCS 305/5(b). In the present case, Jansen  concedes that he did not follow the notice  provisions set out in the statute. Luxembourg  asserts, without citation to supporting  authority, that proper notice is a condition  precedent to recovery of attorney's fees under  the statute and that, by failing to give proper  notice, Jansen has waived his right to recover  the statutory fees. However, it is clear, both  from the context of the notice provision in the  statute and the cases cited by Luxembourg on the  issue, that the purpose of notification under  section 5(b) is to allow the employer the  opportunity to intervene in the employee's suit  in order to protect his statutory lien interest  in any award. See, e.g., Brandt v. John Tilley  Ladders Co., 495 N.E.2d 1269, 1272-73 (Ill. App.  Ct. 1986). There is no support for Luxembourg's  contention that proper notice is a condition  precedent to recovering the statutory attorney's  fees. In the present case, Luxembourg had actual  knowledge of the suit and participated as an  intervenor before being served with the third-  party complaint from Aaron Process. Not only did  Luxembourg have the opportunity to protect its  workers' compensation lien, the company did so  and has received actual reimbursement from  Jansen. See LaFever, 706 N.E.2d at 453 ("The  'benefit' that obligates an employer to pay  section 5(b) fees and costs is actual  reimbursement.").

12
As its only specific example of prejudice  resulting from the defective notice, Luxembourg  points to the fact that the deposition of its  president, Mark Ernster, was taken before  Luxembourg was added as a party in the underlying  case. Luxembourg characterizes this act as an  "ambush" by plaintiffs' attorney. However,  Luxembourg fails to note that while the district  court refused to quash the deposition, it stated  that it would allow the parties to reconvene  Ernster's deposition if necessary. The deposition  was never reconvened. Luxembourg fails to show  prejudice. See Ramsey v. Morrison, 676 N.E.2d  1304, 1312 (Ill. 1997) (holding that an employer  was not prejudiced by depositions taken before he  entered a suit as a third-party defendant when he  had ample opportunity to reconvene the  depositions but failed to do so). Because  Luxembourg had actual knowledge of Jansen's suit,  participated in the suit as an intervenor, and  was not prejudiced by Jansen's failure to follow  the notice provisions set out in the statute,  Jansen's failure to give proper notice does not  preclude him from recovering statutory attorney's  fees.

13
Luxembourg's remaining arguments also are  without merit. While Luxembourg contends that, to  justify an award of attorney's fees, an attorney-  client relationship must exist between itself and  Jansen's attorney, it cites no authority to  support this position. It is clear from the  statute that the statutory fees are to be paid by  an employer to the attorney representing the  injured employee. 820 ILCS 305/5(b) (stating  "where the services of an attorney at law of the  employee or dependents have resulted in or  substantially contributed to the procurement . .  . of the proceeds out of which the employer is  reimbursed" an award of attorney's fees is  appropriate) (emphasis added); see also Silva v.  Electrical Sys., Inc., 701 N.E.2d 506, 506 (Ill.  1998) ("[A]n employer who is reimbursed for its  workers' compensation payments out of the  proceeds of the employee's action against a third  party is required to pay the employee's attorney  '25% of the gross amount of such  reimbursement.'") (emphasis added). An attorney-  client relationship between the employer and the  attorney seeking fees is not required.  Additionally, Luxembourg has not produced any  evidence of another agreement between itself and  Jansen's attorney that would preclude the  recovery of the statutory fees.

14
As the Illinois Supreme Court has stated,  section 5(b) is based on the premise "that an  employer should not get 'something' (a  reimbursement on workers' compensation payments)  for 'nothing.'" LaFever, 706 N.E.2d at 453. That  is exactly what Luxembourg is trying to do in the  present case. Luxembourg was reimbursed for its  workers' compensation payments due to the efforts  of Jansen's attorney. Section 5(b) ensures that  employers who benefit from such reimbursement pay  their fair share of the costs of the recovery.  Silva, 701 N.E.2d at 510. Jansen is entitled to  attorney's fees from Luxembourg. Luxembourg does  not challenge the amount of fees awarded by the  district court, and we affirm the decision of the  district court. One issue remains.

15
Jansen has filed a motion for sanctions against  Luxembourg pursuant to Fed. R. App. P. 38. Rule  38 allows an appellate court to award sanctions  against an appellant who brings a frivolous  appeal. "An appeal is 'frivolous' when the result  is foreordained by the lack of substance to the  appellant's arguments." Mars Steel Corp. v.  Continental Bank, 880 F.2d 928, 938 (7th Cir.  1989) (en banc). In the present case, the  district court based its decision on "the  Illinois Supreme Court's unequivocal  interpretation in Silva regarding an employer's  duty to pay a plaintiff's attorney's fees and  costs under section 5(b)." However, Luxembourg  fails to address Silva, 701 N.E.2d 506, in either  its initial or reply brief. Moreover, while  Luxembourg argues that an employer's obligation  to pay attorney's fees under section 5(b) is not  absolute, the company cites no cases in which an  employer was excused from paying attorney's fees  after receiving reimbursement for its workers'  compensation payments, and Luxembourg ignores the  Illinois Supreme Court's recent statement that  actual reimbursement is "[t]he 'benefit' that  obligates an employer to pay section 5(b) fees  and costs." LaFever, 706 N.E.2d at 453.  Additionally, as Jansen has pointed out,  Luxembourg's appendix contained only the first  page of the district court order and did not  include the analysis delivered by the district  court in connection with its award of fees and  costs, an omission which was cured by Jansen in  his motion for sanctions. This constitutes a  violation of Circuit Rule 30(a).3 Moreover,  despite the omission, counsel for Luxembourg  submitted a Circuit Rule 30(d) statement in which  he certified that all of the materials required  under Circuit Rule 30(a) and (b) were included in  the appendix. This court has warned appellants  and their counsel on numerous occasions that this  behavior alone is sufficient to justify an award  of sanctions. See Collins v. Educational Therapy  Ctr., 184 F.3d 617, 622 (7th Cir. 1999)  (collecting cases). This appeal is frivolous, and  Rule 38 sanctions are appropriate.

III.  CONCLUSION

16
The decision of the district court is affirmed.  Jansen's motion for sanctions pursuant to Fed. R.  App. P. 38 is granted, and Luxembourg is ordered  to compensate Jansen for the cost of defending  this frivolous appeal. Within fifteen days,  Jansen shall submit to this court a statement of his costs, including attorney's fees, reasonably  incurred in connection with this appeal.

17
AFFIRMED; MOTION FOR RULE 38  SANCTIONS GRANTED.

Notes:

1
 Luxembourg's liability for contribution was  limited to the amount of its statutory workers'  compensation liability under Kotecki v. Cyclops  Welding Corp., 585 N.E.2d 1023 (Ill. 1991).

2
 We note at the outset that Luxembourg asserts  only that it is not liable for attorney's fees  under the statute and does not contest the  district court's award of costs.

3
 Circuit Rule 30(a) provides: "The appellant shall  submit, bound with the main brief, an appendix  containing the judgment or order under review and  any opinion, memorandum of decision, findings of  fact and conclusions of law, or oral statement of  reasons delivered by the trial court . . . upon  the rendering of that judgment, decree, or order."  (emphasis added).