Garcia v. LumaCorp Inc

Citations: 429 F.3d 549; 36 Employee Benefits Cas. (BNA) 1080; 2005 U.S. App. LEXIS 23544; 2005 WL 2857455Docket: 04-11032

Court: Court of Appeals for the Fifth Circuit; October 31, 2005; Federal Appellate Court

Original Court Document: View Document

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Jaime and Maria Luisa Garcia appeal the Fifth Circuit's affirmation of a summary judgment favoring LumaCorp, Inc., following Mr. Garcia's work-related injury in October 2000. While employed as an assistant maintenance worker at the Villages of Meadow West Apartments, Mr. Garcia suffered serious injuries due to an explosion of pool chemicals, which resulted in extensive medical treatment and his inability to return to work. LumaCorp, operating as a nonsubscriber to the Texas Workers’ Compensation Act, had adopted an Employee Injury Benefit Plan requiring new employees to sign an election form waiving their right to sue for work-related injuries. Mr. Garcia, who was employed by LumaCorp since August 1998, signed this form, which explicitly waived any claims against LumaCorp for injuries sustained during employment, stating that benefits under the Plan would be his sole remedy. Following his injury, he began receiving benefits under this Plan, which was in effect at the time. The court noted that Mr. Garcia's signing of the election form was valid as pre-injury waivers were permissible under Texas law at that time, and the relevant statutes were amended only after his injury occurred. Thus, the court concluded there was no error in the district court's ruling regarding the coverage under the Employee Injury Benefit Plan or the enforcement of the waiver agreement.

On February 16, 2001, LumaCorp established the Occupational Injury Benefit Plan, which replaced the 1993 Plan retroactively effective December 1, 2000, increasing benefits for work-related injuries from $100,000 to $1,000,000. Current employees, including Garcia, did not need to sign new documents to transition to the New Plan, but Garcia continued to receive benefits under the 1993 Plan due to his prior injury. By April 2001, Garcia’s medical expenses exceeded the $100,000 limit of the 1993 Plan, leading to LumaCorp's third-party administrator indicating no further reimbursements without insurer preapproval. LumaCorp still paid Garcia additional bills, totaling $14,441.96.

On October 23, 2001, LumaCorp officials visited the Garcias to present a “Settlement Agreement and Release,” explaining that Garcia had exhausted his benefits under the 1993 Plan. They offered to cover Garcia's outstanding medical bills plus an additional $10,000 in exchange for signing the settlement. A Spanish translation was provided, and Garcia signed the agreement, releasing LumaCorp from all claims related to his injury.

On November 6, 2002, the Garcias filed a lawsuit alleging multiple claims against LumaCorp. The district court, in a July 24, 2004 order, denied their motion for partial summary judgment, granted summary judgment for LumaCorp on all claims, and dismissed the action with prejudice. The Garcias appealed, citing eleven errors. The appellate review concluded that Garcia waived all claims when he signed the participation form for the 1993 Plan, which remained valid despite the New Plan's adoption. Additionally, the settlement agreement released LumaCorp from all claims. The appellate court affirmed the district court's rulings.

Coverage under the 1993 Plan remains effective for Mr. Garcia's injury, despite LumaCorp's termination of the 1993 Plan and the introduction of the New Plan. The evidence indicates that Mr. Garcia signed an election form to participate in the 1993 Plan on August 17, 1998, which was active at the time of his injury. Although the 1993 Plan was revoked, benefits for work-related injuries incurred before its termination would continue. The New Plan, which excludes pre-existing conditions from coverage, does not apply to Mr. Garcia's injury since it occurred before its effective date. The Plan Administrator, Mattingly, interpreted the New Plan's provisions reasonably, affirming that benefits under the 1993 Plan would persist until eligibility ended as defined by that Plan.

The Garcias' challenge to the validity of the Settlement Agreement, claiming inadequacy of consideration and coercion, lacks merit. They argue that the Release dated October 23, 2001, was void due to the prior revocation of the 1993 Plan. However, the evidence shows that the Release was based on LumaCorp's offer to cover Garcia’s outstanding medical expenses and an additional payment of $10,000, independent of the 1993 Plan, which had been fully exhausted. Thus, the Release's validity remains intact despite the revocation of the earlier Plan.

The district court determined that the Garcias misinterpreted the concepts of failure of consideration and adequacy of consideration. It granted summary judgment to LumaCorp, concluding that the Garcias failed to demonstrate a genuine issue regarding adequacy. Under Texas law, inadequacy must be grossly disproportionate to the extent that it shocks the conscience, akin to fraud. The court found that Garcia received more than what was due under the 1993 Plan and that LumaCorp was not obligated to pay further once the Plan benefits were exhausted. LumaCorp's offer to cover Garcia's medical bills exceeding $14,000 along with an additional $10,000 payment in exchange for a release was deemed adequate. 

The Garcias claimed coercion in signing the release, asserting that LumaCorp approached Garcia at his home with verbal representations not included in the release and without a Spanish document. They argued this constituted economic duress. However, they failed to provide any supporting evidence in the record for these claims, relying solely on unsubstantiated personal affidavits, which were insufficient for establishing a genuine issue of material fact. The court emphasized that unsubstantiated assertions cannot serve as competent evidence for summary judgment.

The district court affirmed that Garcia had waived all causes of action and rights to sue under the 1993 Plan and confirmed the validity of the Settlement Agreement as an independent release of all claims. Consequently, the district court's summary judgment in favor of LumaCorp on all claims was upheld, and further points raised by the Garcias were not addressed.