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The Regents of the University v. Memorandum and Order

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA


December 7, 2010

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA,
PLAINTIFF,
v.
MEMORANDUM AND ORDER BERNZOMATIC, ET AL., DEFENDANTS.

The opinion of the court was delivered by: Frank C. Damrell, Jr. United States District Judge

----oo0oo----This matter is before the court on defendants Bernzomatic,*fn1 Irwin Industrial Tool Company, and W.W. Grainger, Inc.'s (collectively, "defendants") motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.*fn2 For the reasons set forth below,*fn3 defendants' motion for summary judgment is DENIED.

BACKGROUND*fn4

This case arises out of injuries suffered by Scott Callaway ("Callaway") and James Bartlett ("Bartlett") on September 2, 2008, during the course and scope of their employment with plaintiff. (PUF ¶ 1-2.) Callaway and Bartlett were using a BernzOmatic MAPP gas canister and Lenox torch tip assembly. (PUF

¶ 2.) Specifically, the assembly has been identified as a Lenox branded Bernzomatic torch with a MAPP gas cylinder, bearing a Bernzomatic label ("the Bernzomatic product"). (PUF ¶ 3.) In the course of using the Bernzomatic product, Callaway and Bartlett suffered burn injuries. (PUF ¶ 4.) Plaintiff has paid workers' compensation benefits to and on behalf of Callaway and Bartlett. (PUF ¶ 5.) At the time plaintiff filed its opposition to defendants' motion for summary judgment, plaintiff had expended $32,938.07 in benefits for the treatment of Bartlett's injuries and $134,524.48 in benefits for the treatment of Callaway's injuries. (PDF ¶ 5.)

Plaintiff also filed numerous objections to defendants' evidence. The court has reviewed the filings and concludes that the evidence objected to is either irrelevant to the court's determination or the objections are otherwise without merit. Accordingly, the objections are OVERRULED.

On August 5, 2009, Callaway and Bartlett filed a personal injury lawsuit against defendants. (PUF ¶ 6.) Subsequently, counsel for Callaway and Bartlett contacted defendants' counsel, stating that their expert witness had established that the Bernzomatic product was not defective in design or manufacture and, therefore, that they were going to dismiss the action.*fn5

(PUF ¶ 7.) A stipulated dismissal with prejudice of the lawsuit was signed by attorneys for Callaway and Bartlett and for defendants and filed on January 4, 2010. (PUF ¶ 8.) The stipulated dismissal provided that "each party shall bear its own costs and attorneys' fees in connection with the lawsuit and the negotiation and preparation of this Stipulation Dismissal." (Ex. B to Decl. of Michael C. Osborne ("Osborne Decl."), filed Aug. 13, 2010.)

On April 5, 2010, plaintiff filed a complaint against defendants in the Superior Court of California, County of Yolo. Defendants were served on April 20, 2010. On May 19, 2010, defendants removed the case to this court on the basis of federal diversity jurisdiction.

STANDARD

The Federal Rules of Civil Procedure provide for summary judgment where "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see California v. Campbell, 138 F.3d 772, 780 (9th Cir. 1998). The evidence must be viewed in the light most favorable to the nonmoving party. See Lopez v. Smith, 203 F.3d 1122, 1131 (9th Cir. 2000) (en banc).

The moving party bears the initial burden of demonstrating the absence of a genuine issue of fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). If the moving party fails to meet this burden, "the nonmoving party has no obligation to produce anything, even if the nonmoving party would have the ultimate burden of persuasion at trial." Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03 (9th Cir. 2000). However, if the nonmoving party has the burden of proof at trial, the moving party only needs to show "that there is an absence of evidence to support the nonmoving party's case." Celotex Corp., 477 U.S. at 325.

Once the moving party has met its burden of proof, the nonmoving party must produce evidence on which a reasonable trier of fact could find in its favor viewing the record as a whole in light of the evidentiary burden the law places on that party. See Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1221 (9th Cir. 1995). The nonmoving party cannot simply rest on its allegations without any significant probative evidence tending to support the complaint. See Nissan Fire & Marine, 210 F.3d at 1107. Instead, through admissible evidence the nonmoving party "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). /////

ANALYSIS

Plaintiff brings suit for recovery of workers' compensation benefits under California Labor Code § 3582 et seq. Defendants move to dismiss, arguing that (1) plaintiff is precluded from bringing suit under equitable subrogation principles because Bartlett and Callaway dismissed their claims with prejudice; and (2) plaintiff fails to submit evidence of defect.

A. Plaintiff's Ability to Pursue a Claim California Labor Code § 3852 provides that "[t]he claims of an employee . . . for compensation does not affect his or her right of action for all damages proximately resulting from the injury or death against any person other than the employer. Any employer who pays, or becomes obligated to pay compensation . . . may likewise make a claim or bring an action against the third person." In seeking to recoup such benefits and damages, the employer may "(1) intervene in an injured worker's action, (2) file an independent action, or (3) assert a lien in an injured worker's action." Fremont Comp. Ins. Co. v. Sierra Pine, Ltd., 121 Cal. App. 4th 389, 396 (3d Dist. 2004).

Section 3859 of the Labor Code provides that "[n]o release or settlement of any claim . . . as to either the employee or the employer is valid without the written consent of both." While an employee may "settle and release any claim" against a third party without the consent of the employer, "such settlement or release shall be subject to the employer's right to proceed to recover compensation he has paid in accordance with § 3582." Cal. Labor Code § 3859. Further, section 3860 provides, No release or settlement under this chapter, with or without suit, is valid or binding as to any party thereto without notice to both the employer and the employee, with opportunity to the employer to recover the amount of compensation he has paid or become obligated to pay and any special damages to which he may be entitled under Section 3852, and opportunity to the employee to recover all damages he has suffered and with provision for determination of expenses and attorney's fees as herein provided.

Section 3852 has been characterized as "codifying principles of equitable subrogation, rather than indemnity." Fremont Comp. Ins. Co., 121 Cal. App. 4th at 398 (noting that such characterizations have been made in response to claims that § 3582 creates a source of substantive liability). "Equitable subrogation is a legal device which permits a party who has been required to satisfy a loss created by a third party's wrong to step into the shoes of the loser and recover from the wrongdoer." Id. "Because the subrogee steps into the shoes of the subrogor, the third party has all defenses against the subrogee that it would have against the subrogor." Id. (citing Fireman's Fund Ins. Co. v. Maryland Cas. Co., 65 Cal. App. 4th 1279, 1291 (1st Dist. 1998)).

However, "the generality that the Labor Code models common law subrogation principles does not warrant disregarding the explicit terms of the statutory scheme." Id. Rather, the California Supreme Court has explained that subrogation principles must be applied to further the legislative purposes of the compensation statutes. Id. (citing Bd. of Admin. v. Glover, 34 Cal. 3d 906, 916-17 (1983)). The addition of §§ 3859 and 3860 to the compensation statutes in 1971 "authorize an employee's settlement of his own unreimbursed claim for damages without the employer's approval and recognize the employer's independent right to proceed against the alleged tortfeasor to recover payments it had made to its employee." Glover 34 Cal. 3d at 914. Courts have construed the legislative purpose of these sections as ensuring that "the third party is liable for all the wrong his tortfeasance brought about; this includes both the damage to the employee and payments made or required to be made by the employer." Fremont Comp. Ins. Co., 121 Cal. App. 4th at 400 (citations and quotations omitted); see Van Nuis v. Los Angeles Soap Co., 36 Cal. App. 3d 222, 229 (2d Dist. 1974) (noting that the dual purpose of the subrogation provisions are to ensure full reimbursement to the employer for the amount of compensation benefits paid to the employee and to prevent an employee's double recovery of payments for the same compensable injury). There is also a "corresponding public policy to reduce the cost of compensation insurance by allowing carriers to recoup payments." Id. (citing Abdala v. Aziz, 3 Cal. App. 4th 369, 377 (2d Dist. 1992)). Accordingly, there is "a clear legislative policy militating in favor of reimbursement whenever possible." Abdala, 3 Cal. App. 4th at 377; see Fremont Comp. Ins. Co., 121 Cal. App. 4th at 400 ("When [an employer] has paid out money it should be able to recoup.") (emphasis in original).

Under the compensation statutes, an employer may have an independent action against an alleged third-party tortfeasor, notwithstanding a settlement or release between the tortfeasor and the employee, if the statutory notice and consent requirements in favor of the employer have not been satisfied. See Roski v. Superior Court, 17 Cal. App. 3d 841, 846 (2d Dist. 1971).*fn6 The obligation to provide notice of release or settlement to an employer is generally imposed upon the employee. See Glover, 34 Cal. 3d at 916 (noting that "the burden of failure to comply with the statutory obligation of notice to [the employer] of the employee's settlement is placed upon the employee" because the employee is the only participant in the settlement who knew of the employer's claim for reimbursement). However, "where . . . the third party tortfeasor prior to settlement is or reasonably should be aware of the possibility of the employer's claim, such tortfeasor may also incur liability to the employer under the statutory scheme because of his failure to notify the employer of the settlement and to obtain its consent thereto." Id. at 919; see Ventura County Employees' Retirement Ass'n v. Pope, 87 Cal. App. 3d 938, 957 (1978) (noting that a knowing third-party tortfeasor who proceeded with a settlement and release with an employee -- without the employee or the tortfeasor giving notice of the prospective settlement to the employer -- entered into the settlement at its peril; absent such notice to the employer, the settlement is not binding on the employer and need not be taken into account in future litigation against the tortfeasor); see also McKinnon v. Otis Elevator Co., 149 Cal. App. 4th 1125, 1135 (3d Dist. 2007) (applying the same principle to a settlement entered into by an employer and third party without notice to the employee).

In this case, Callaway and Bartlett's voluntary dismissal with prejudice of their claims against defendants does not bar plaintiff's lawsuit against defendants. First, the stipulated dismissal of the claims, signed by both the employees' counsel and defendants' counsel, served as a release of claims by the employees against defendants.*fn7 As such, the notice and consent provisions of §§ 3859 and 3860 apply. Second, there is no evidence that either the employees, employees' counsel, defendants, or defendants' counsel provided plaintiff with the requisite notice; nor is there evidence that plaintiff consented to the release.*fn8 Third, defendants concede that they were aware that plaintiff had an interest in the claim. Specifically, in their reply, defendants note that "there was an inspection of the torch and cylinder attended by the injured workers' representatives, Bernzomatic's representatives, and also the Regents' representatives." Further, the employees' complaint "specified all the identifying and factual details of [the] accident and injury" that occurred during "their course and scope of employment with the University of California, Davis." McKinnon, 149 Cal. App. 4th at 1137 (noting that the third party knew or reasonably should have been aware of the employee's possible claim for damages as a result of the employer's complaint); (Complaint for Damages for Personal Injuries, Ex. A to Osborne Decl., filed Aug. 13, 2010, ¶ 5). Therefore, defendants were aware or reasonably should have been aware of plaintiff's claim for reimbursement. Accordingly, under the circumstances, plaintiff has an independent action against defendant, notwithstanding the employees' release because the statutory notice and consent requirements in favor of the employer have not been satisfied.

Defendants' reliance on Hubbard v. Boelt, 140 Cal. App. 3d 882 (4th Dist. 1983), is misplaced. In Hubbard, the court noted that it was established that the employee's claim was barred by the "fireman's rule" because the employee had "knowingly and voluntarily confronted a hazard" and thus, the employee was not entitled to damages. Id. at 883. The court held that as the employee did not have a claim for damages, the employer similarly did not have a claim under § 3852 because "an employer who has paid benefits to an injured employee cannot collect reimbursement from a party who is immune to suit by the employee." Id. at 884. However, unlike this case, Hubbard addressed an underlying defense on the merits of the claim against the defendant; it did not involve a release or settlement of the underlying claim. Further, unlike this case, no statutory provisions were directly implicated by that defense. Accordingly, because Hubbard did not involve a release or settlement or raise issues under §§ 3859 or 3860, the court's reasoning and conclusion in that case is unpersuasive.

For the foregoing reasons, and in light of the "clear legislative policy militating in favor of reimbursement whenever possible," the dismissal of the employee's lawsuit does not bar plaintiff's suit against defendants.

B. Evidence of Defect To set forth a claim of product defect, a plaintiff must "present substantial evidence" that a defendant manufactured the product, the product was defective in its manufacture or design, the defect existed when the tire left the defendant's possession, the defect was the cause of the injury, and the injury was caused by a reasonably foreseeable use. Stephen v. Ford Motor Co., 134 Cal. App. 4th 1363, 1370 (2d Dist. 2005). "[W]here . . . the complexity of the causation issue is beyond common experience, expert testimony is required to establish causation." Id. at 1373.

In this case, there is conflicting evidence regarding whether defendants' product was defective and whether any such defect caused Callaway and Bartlett's injuries. Defendants rely upon Callaway and Bartlett's retained expert,*fn9 Michael O'Connor. O'Connor, a licensed structural, electrical, and mechanical engineer, determined that the cylinder breach, which was a substantial factor in the injuries, was due to improper handling and user abuse, not manufacturing or design defect. (See PUF ¶ 9-12.) Plaintiff has retained the services of Ramesh Kar ("Kar"), Ph.D., P.E., a Registered Professional Metallurgical Engineer and a Board Certified Diplomate by the American Board of Forensics Examiner. (PDF ¶ 5-6.) Kar concluded that the premature failure in the brazed neck region of the cylinder was not caused by abuse, accidental dropping of the cylinder, or impact stresses. (PDF ¶ 10.) Rather, he asserts that macroscopic examination of the fractured neck region "indicates that failure more likely than not was caused by a serious metallurgical manufacturing defect in the brazed region of the neck." (Decl. of Ramesh J. Kar, Ph.D., P.E., filed Sept. 2, 2010, ¶ 13.)*fn10 Accordingly, because plaintiff and defendants have proffered conflicting evidence regarding whether there was a defect and whether the defect cause the injuries, summary judgment is inappropriate.

CONCLUSION

For the foregoing reasons, defendants' motion for summary judgment is DENIED.

IT IS SO ORDERED.


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