During the May term, the Illinois Supreme Court heard oral argument in Bayer v. Panduit Corp., an appeal from Division 1 of the First District which poses several questions about the interaction of the Workers’ Compensation Act and the Contribution Act.  Our detailed report on the facts and lower court decisions in Bayer is here.

The defendant in Bayer is an electrical components manufacturer in De Kalb.  In 2007, defendant decided to expand its warehouse, acting as its own general contractor.  The defendant signed contracts with an iron works company for the structural steel.  The iron works contractor subcontracted with the plaintiff’s employer to upload and erect the structure.

The plaintiff was seriously injured working at the site.  He filed a workers compensation claim against his employer.  He subsequently filed suit against the defendant for negligence, later adding the iron works company as an additional defendant.  The defendant filed a third-party claim against the plaintiff’s employer, alleging that it had failed to ensure the safety of its employees and seeking a judgment in contribution.

The plaintiff and his former employer filed a motion for good faith settlement under Section 2 of the Contribution Act (740 ILCS 100/2).  Section 2 provides that when a party settles a claim in good faith against one tortfeasor, the good faith finding discharges that tortfeasor from any liability in contribution.  The motion was granted.  Two weeks later, the plaintiff settled with the iron works company, leaving only the defendant – the property owner – to go to trial.  Trial resulted in judgment for the plaintiff for $64 million.

The defendant property owner filed a posttrial motion challenging the dismissal of the contribution claim on the grounds that the settlement had not been in good faith.  The plaintiff filed a motion for an award of attorneys’ fees and costs against his former employer pursuant to the Workers Compensation Act.  The defendant’s motion was denied; the plaintiff’s motion was granted as to fees relating to future workers compensation payments, but denied as to costs.

Both the defendant and the plaintiff’s former employer appealed.

The defendant filed a posttrial motion alleging that the court had erred in dismissing the contribution claim against the plaintiff’s employer because the settlement was not in good faith. Following a hearing, the trial court denied the defendant’s motion. Concurrently, the plaintiff filed a motion for attorneys’ fees and costs against his employer pursuant to the Workers Compensation Act. That motion was granted as to fees relating to future workers’ compensation payments, but denied as to costs.

Both the defendant and the plaintiff’s employer filed notices of appeal.  The Appellate Court affirmed the finding of good faith settlement and the consequent dismissal of the contribution claim.  The court reversed in part with respect to attorneys’ fees, holding that the employer was not liable for fees in connection with future medical benefits suspended under the Workers Compensation Act as a result of tort settlements.

Counsel for the plaintiff began the Supreme Court argument.  He explained that the plaintiff’s former employer did not challenge its liability for attorneys’ fees in connection with savings on future losses, but did challenge the fees award with respect to medical expenses.  Chief Justice Garman asked whether the issue was one of statutory interpretation.  Counsel responded that it was, and that the first two paragraphs of the applicable section were at play.  Justice Burke asked if future medicals were included in the parties’ settlement, weren’t attorney fees included?  Counsel answered that there were attorneys’ fees paid, but Section (b) of the statute requires a mandatory contribution to the one-third attorney fee – a pro rata division between the plaintiff, the injured party and the employer.  Counsel explained that the plaintiff’s employer did not challenge the attorneys’ fees award with respect to lost wages.  The Chief Justice asked whether the plain language of the statute supported the plaintiff’s position, or was the statute ambiguous.  Counsel answered that the first paragraph of the statute established what the reimbursements were.  Justice Thomas asked what plaintiff’s position was on whether his position amounted to a double recovery.  Counsel answered that the trial court had specifically ordered that there should be no duplicate fees.  Justice Thomas asked whether any overlapping fees would be returned to the defendant, and counsel said yes.  The argument the employer was making, counsel argued, was not consistent with the statute.  The cases say that the parties settle, and workers compensation payments are suspended, and future payments to the employer are relieved.  As the payments become due, the employer is relieved and savings are realized.

Counsel for the employer argued next.  He began by arguing that the issue was entirely one of statutory interpretation.  The issue before the Court involved statutory interpretation – it was not a common fund issue.  Justice Theis suggested that Section 8(a) of the Act seemed to define compensation as requiring the employer to provide all medical expenses and subsequent expenses incurred – did that include future medical expenses?  Counsel said yes.  Justice Theis commented that the key word the defendant appeared to be concerned with was “reimbursement” versus “compensation.”  Counsel agreed.  Justice Theis noted that the statute says that compensation includes future medical expenses – now the defendant was saying that reimbursement is distinct from compensation.  Counsel answered that this wasn’t a reimbursement; the expenses had already been paid.  Medical expenses required ongoing administration and constant disputes.  Counsel argued that there had been an incredible overpayment already – the defendant has already paid almost $28 million, including a $500,000 deductible on both sides.  Now the Appellate Court is suggesting that the defendant pay on suspended medical benefits.  Counsel concluded by arguing that the plaintiff was seeking a double recovery, and it was clearly contrary to the statute.

Counsel for the plaintiff concluded with rebuttal.  Justice Thmoas asked about weekly future medical expenses – did the one-third already paid in attorneys’ fees require judicial monitoring?  And if not, did this amount to a lawyer paying a fee to a nonlawyer?  Counsel responded that there was nothing barring the fee.  Chief Justice Garman asked whether there was an issue regarding the amount of monitoring that would be necessary because the medical expenses are indefinite in duration.  Counsel responded that there was no indication that monitoring would be necessary here – even if an issue developed down the road, that doesn’t mean that the defendant could rewrite the statute.  Justice Thomas concluded by pointing out that the defendant had a theory as to why this issue hadn’t arisen before – did the plaintiffs have an alternative theory?  Counsel answered that the case involved a significant verdict, and there was accordingly quite a bit of money at stake.  This case was the first time the matter had ever been contested by defense counsel.

We expect Bayer to be decided in three to four months.

Image courtesy of Flickr by Suga (no changes).