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Eastman v. Messner

December 15, 1998

DENNIS EASTMAN, PLAINTIFF-APPELLEE,
v.
STEVEN MESSNER, DEFENDANT-APPELLEE. GATES MCDONALD, FOR THE USE AND BENEFIT OF MEYER MATERIAL COMPANY, INTERVENING PETITIONER-APPELLANT.



The opinion of the court was delivered by: Justice Rakowski delivered the opinion of the court.

Appeal from the Circuit Court of Cook County. Honorable Philip L. Bronstein, Judge Presiding.

Pursuant to the Workers' Compensation Act (Act) (820 ILCS 305/5 (West 1996)), an employer who has paid workers' compensation benefits to an injured employee is entitled to reimbursement where the employee recovers damages from a third party who caused the injuries. In addition, the employer may directly file suit against the third party if the employee fails to do so. In this case, plaintiff sustained injuries at work and was paid workers' compensation benefits. Plaintiff's counsel failed to file suit against the third-party tortfeasor within the statute of limitations. Further, neither the employer nor its insurance administrator filed suit against the tortfeasor. Plaintiff then filed the instant legal malpractice action against counsel. Under these circumstances, is the employer or insurance administrator entitled to be reimbursed from the proceeds of the malpractice action? Based upon the clear language of section 5(b) of the Act, the answer is no.

BACKGROUND

Plaintiff, Dennis Eastman, was injured while working for Meyer Material Company (employer). He was paid workers' compensation benefits by Gates McDonald, Meyer's insurance administrator. Plaintiff retained the services of attorney Steven Messner to prosecute a personal injury action arising out of the incident. However, the attorney failed to file suit within the statute of limitations and plaintiff filed this legal malpractice action against the attorney. The insurance administrator filed a petition to intervene, on behalf of employer, alleging a lien pursuant to section 5(b). The motion was denied. The insurance administrator appeals, contending that it is entitled to a lien upon any legal malpractice recovery. We have jurisdiction pursuant to Supreme Court Rule 304(a). 155 Ill. 2d R. 304(a).

ANALYSIS

Section 5(b) of the Act provides, in pertinent part:

"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. In such case, however, if the action against such other person is brought by the injured employee *** and judgment is obtained and paid, or settlement is made with such other person, *** then from the amount received by such employee *** there shall be paid to the employer the amount of compensation paid or to be paid by him to such employee ***."

"***"

"*** [T]he employer may have or claim a lien upon any award, judgment or fund out of which such employee might be compensated from such third party."

"*** The employer may, at any time thereafter join in the action upon his motion so that all orders of court after hearing and judgment shall be made for his protection. ***"

"In the event the employee or his personal representative fails to institute a proceeding against such third person at any time prior to 3 months before such action would be barred, the employer may in his own name or in the name of the employee, or his personal representative, commence a proceeding against such other person for the recovery of damages on account of such injury or death to the employee." 820 ILCS 305/5(b) (West 1996).

Two lines of cases have emerged on this issue. One line allows a lien to attach to a legal malpractice action. See Bongiorno v. Liberty Mutual Insurance Co., 417 Mass. 396, 630 N.E.2d 274 (1994); Frazier v. New Jersey Manufacturers Insurance Co., 142 N.J. 590, 667 A.2d 670 (1995); Toole v. EBI Cos., 314 Or. 102, 838 P.2d 60 (1992); Tallerbay v. Delong, 68 Wash. App. 351, 842 P.2d 1023 (1993). The courts in these jurisdictions look beyond the words of the relevant statute to what they perceive to be the legislative intent. The second line prohibits a lien form attaching to legal malpractice actions. See Fink v. Dimick, 179 F. Supp. 354 (D. Conn. 1959); Travelers Insurance Co. v. Breese, 138 Ariz. 508, 675 P.2d 1327 (1983); Mt. Pleasant Special School District v. Gebhart, 378 A.2d 146 (Del. Ch. 1977); Sladke v. K Mart Corp., 493 N.W.2d 838 (Iowa 1992). These jurisdictions rely solely upon the plain language of the statute.

Illinois law has been interpreted to recognize both lines. The Fifth District Appellate Court in Woodward v. Pratt, Bradford & Tobin, P.C., 291 Ill. App. 3d 807 (1997), held that a section 5(b) lien does not apply to legal malpractice recoveries. Conversely, the seventh circuit in Williams v. Katz, 23 F.3d 190 (7th Cir. 1994), held that the statutory lien does apply to legal malpractice recoveries.

In Williams, the seventh circuit held that, under Illinois law, a workers' compensation lien attached to any recovery an employee might have, including a legal malpractice action. Although plaintiff argued that the carrier had no lien since ...


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