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Kroemer v. Omaha Track Equipment, L.L.C.

Supreme Court of Nebraska

June 16, 2017

Norman Kroemer, appellee,
v.
Omaha Track Equipment, L.L.C., and The Tie Yard of Omaha, NOW KNOWN AS OMAHA TRACK, INC., APPELLEES, and Ribbon Weld, LLC, appellant.

         1. Statutes: Appeal and Error. Statutory interpretation presents a question of law, for which an appellate court has an obligation to reach an independent conclusion irrespective of the decision made by the court below.

         2. Workers' Compensation: Judgments: Appeal and Error. Distribution of the proceeds of a judgment or settlement under Neb. Rev. Stat. § 48-118.04 (Reissue 2010) is left to the trial court's discretion and reviewed for an abuse of that discretion.

         3. Judges: Words and Phrases. A judicial abuse of discretion requires that the reasons or rulings of a trial judge be clearly untenable, unfairly depriving a litigant of a substantial right and a just result.

         4. Workers' Compensation: Subrogation. Neb. Rev. Stat. § 48-118 (Reissue 2010) grants an employer who has paid workers' compensation benefits to an employee injured as a result of the actions of a third party a subrogation interest against payments made by the third party.

         5. Workers' Compensation. A settlement of a third-party claim is void under Neb. Rev. Stat. §48-118.04(1) (Reissue 2010) unless the settlement is either agreed upon in writing by the employee and employer or its insurer or determined by the court to be fair and reasonable.

         6. Workers' Compensation: Insurance. In determining the fairness and reasonableness of a settlement of a third-party claim under the Nebraska Workers' Compensation Act, a court considers liability, damages, and the ability of the third person and his or her liability insurance carrier to satisfy any judgment.

         7. Workers' Compensation: Subrogation. The policies behind the Nebraska Workers' Compensation Act favor a liberal construction in [296 Neb. 973] favor of an employer's statutory right to subrogate against culpable third parties.

         8. Workers' Compensation: Insurance: Case Disapproved. In re Estate of Evertson, 23 Neb.App. 734, 876 N.W.2d 678 (2016), is disapproved to the extent that the court considered payment of premiums and comparative risk in allocating none of the proceeds of a workers' compensation settlement to the insurer.

         9. Workers' Compensation: Subrogation: Equity. Although Neb. Rev. Stat. § 48-118.04(2) (Reissue 2010) calls for a fair and equitable distribution, subrogation in workers' compensation cases is based on statute, and not in equity.

         10. Workers' Compensation: Insurance: Equity. A distribution of the proceeds of a judgment or settlement under Neb. Rev. Stat. § 48-118.04(2) (Reissue 2010) must be fair and equitable to both the employee and the employer or its insurer.

         Appeal from the District Court for Douglas County: J Russell Derr, Judge. Affirmed in part, and in part reversed and remanded with direction.

          Julie A. Jorgensen, of Morrow, Willnauer, Klosterman & Church, L.L.C., for appellant. Ronald L. Brown, of Brown & Theis, L.L.R, for appellee Norman Kroemer.

          Gregory F. Schreiber and Albert M. Engles, of Engles, Ketcham, Olson & Keith, P.C., and, on brief, Brock S.J. Hubert, for appellee Omaha Track Equipment, L.L.C.

          Wright, Miller-Lerman, Cassel, Stacy, Kelch, and Funke, JJ.

          Cassel, J.

         I. INTRODUCTION

         An injured employee proposed to settle his third-party suit for $150, 000. His employer, which had a subrogation interest of over $200, 000, contested the settlement. The district court determined that the settlement was fair and reasonable but [296 Neb. 974] allocated none of it to the employer. Because of the disputed litigation risk, approval of the settlement was not an abuse of discretion. But under our statutory scheme, the allocation of zero to the employer was legally untenable. We affirm in part and in part reverse, and remand with direction.

         II. BACKGROUND

         At the relevant time, Ribbon Weld, LLC, and Omaha Track Equipment, L.L.C. (OTE), were both wholly owned subsidiaries of The Tie Yard of Omaha, now known as Omaha Track, Inc. Ribbon Weld's employees occasionally used OTE's shop to service their equipment and, while doing so, used OTE's tools. Norman Kroemer, a Ribbon Weld employee, sustained an eye injury in connection with the use of OTE's tools at OTE's shop.

         Kroemer and Ribbon Weld entered into a compromise lumpsum settlement for $80, 000, which the Nebraska Workers' Compensation Court approved. After payment of the lump sum, Ribbon Weld's subrogation interest totaled $207, 555.01.

         Kroemer then sued OTE, The Tie Yard of Omaha, and Ribbon Weld. The suit alleged negligence. Kroemer made Ribbon Weld a party "for the limited purpose provided by [Neb. Rev. Stat. §] 48-118 [(Reissue 2010)]." OTE asserted numerous affirmative defenses, including comparative negligence. In Ribbon Weld's answer, it asked that any recovery by Kroemer be subject to its subrogation right.

         Kroemer and OTE engaged in mediation to settle the third-party claim. Ultimately, they negotiated a compromise settlement of claims in the amount of $150, 000. Although Ribbon Weld did not contribute or share in litigation expenses, it contested the proposed settlement.

         The district court held a settlement and allocation hearing under Neb. Rev. Stat. § 48-118.04 (Reissue 2010). Kroemer testified about the accident and injury, which occurred as he and a coworker endeavored to cut through a "spot-weld on [an] Allen wrench." Kroemer planned to hold the Allen wrench [296 Neb. 975] and socket with a pair of pliers as his coworker operated a "Milwaukee grinder with the wheel." When Kroemer's coworker started the grinder, the wheel exploded, sending shrapnel into Kroemer's face and left eye. Kroemer was wearing safety glasses but not a face shield. After undergoing three surgeries, Kroemer ultimately sustained a 95-percent loss of vision in his eye. Due to the injury, Kroemer no longer physically qualified for a commercial driver's license. He returned to work with Ribbon Weld, but had restrictions of light-duty work and no dusty conditions. Ribbon Weld subsequently sold its business, and Kroemer lost his employment a short time later.

         The district court received evidence concerning the value of Kroemer's case. One expert opined that "there was a very substantial probability (80%-90%) of a jury verdict for the defendants were the case to proceed to trial." He stated that a jury could have easily determined that Kroemer's comparative fault was greater than 50 percent. Another expert valued Kroemer's claim in the range of $850, 000 to $1, 250, 000, before consideration of comparative negligence. But he also opined that the settlement of $150, 000 was in Kroemer's best interests, due to the high probability of a jury verdict for the defendants. Ribbon Weld's expert opined that it was "more than likely (70-80% chance) that a Plaintiff's verdict would be reached, " that a jury would likely assess "contributory negligence" in the range of 25 to 35 percent, and that Kroemer would have likely recovered in excess of $500, 000 if the case proceeded to trial. Ribbon Weld's expert believed that the settlement was inadequate given the value of the case and that the settlement appeared to have been accepted with the intention of no, or very minimal, payback to Ribbon Weld of the subrogation amount.

         The district court determined that the settlement of $150, 000 was reasonable. It made the following allocation: $94, 834.27 to Kroemer, $55, 165.73 for attorney fees and expenses, and $0 to Ribbon Weld. [296 Neb. 976] Ribbon Weld appealed, and we granted its petition to bypass review by the Nebraska Court of Appeals. We subsequently ordered supplemental briefing, which we have considered in resolving this appeal.

         III. ASSIGNMENTS OF ERROR

         Ribbon Weld assigns that the district court erred in (1) finding the settlement to be fair and reasonable and (2) finding that an allocation of $0 to Ribbon Weld was fair and equitable.

         IV. STANDARD OF REVIEW

         Statutory interpretation presents a question of law, for which an appellate court has an obligation to reach an independent conclusion irrespective of the decision made by the court below.[1]

         Distribution of the proceeds of a judgment or settlement under § 48-118.04 is left to the trial court's discretion and reviewed for an abuse of that discretion.[2] A judicial abuse of discretion requires that the reasons or rulings of a trial judge be clearly untenable, unfairly depriving a litigant of a substantial right and a just result.[3]

         V. ANALYSIS

         1. Overview

         We first set forth two principles of law under the Nebraska Workers' Compensation Act (the Act).[4] First, § 48-118 grants an employer who has paid workers' compensation benefits to an employee injured as a result of the actions of a third party a subrogation interest against payments made by the third party.[5] Second, a settlement of a third-party claim [296 Neb. 977] is void under ยง 48-118.04(1) unless the settlement is either agreed upon in writing by ...


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