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Lexington Ins. Co. v. SHRM CATERING SERVICES, INC.
Citations: 567 F.3d 182; 2009 WL 1176903Docket: 08-40322
Court: Court of Appeals for the Fifth Circuit; May 4, 2009; Federal Appellate Court
Original Court Document: View Document
Lexington Insurance Company, as the assignee of Ann Wells, appealed the dismissal of its lawsuit against S.H.R.M. Catering Services, Inc. (Eurest) by the United States District Court for the Southern District of Texas. Wells, a former employee of Eurest, sustained injuries while working on the M/V OCEAN LEXINGTON and initially sued Diamond Offshore Drilling Services, Inc. (Diamond), her employer's client, without naming Eurest as a defendant. Although evidence suggested Eurest might share liability, Diamond did not move to join Eurest until shortly before trial, which the district court dismissed as untimely. Following a settlement between Wells and Diamond, Wells assigned her claims against Eurest to Lexington, which subsequently filed suit against Eurest. Eurest moved to dismiss the case, contending that the assignment was invalid under federal maritime law, leading the district court to agree and dismiss Lexington's claims under Rule 12(b)(6). Lexington argued that the district court erred in this conclusion. The appellate court reviewed the dismissal de novo, emphasizing that to survive such a motion, a complaint must present sufficient factual allegations to support a plausible claim for relief. The court concluded that if assignments of unliquidated personal injury claims are deemed invalid under federal maritime law, it must affirm the dismissal of Lexington's claims. The court has not yet determined the permissibility of assigning unliquidated tort personal injury claims under federal maritime law. In the absence of direct authority, admiralty courts may refer to common law, which generally prohibits such assignments unless a statute allows them, aiming to prevent champerty and maintenance. Although Lexington argues that concerns about these doctrines are outdated, the court intends to adhere to the common law prohibition unless compelling reasons suggest otherwise. The framework of proportionate liability in maritime tort law, established in McDermott Inc. v. AmClyde, dictates that a tortfeasor is liable only for their share of fault, and that settling tortfeasors cannot transfer liability claims benefiting themselves against non-settling tortfeasors. In the Ondimar Transportes Maritimos case, the court noted that an assignment of property damage claims could be invalid if generally prohibited or if it contradicts McDermott's principles. Although most state courts may permit such assignments, the court emphasized that allowing them would undermine McDermott's goals of consistency, settlement promotion, and judicial economy, leading to more complex litigation. Ultimately, the court ruled that the assignment from Wells to Lexington is invalid, preventing Lexington from suing Eurest. It acknowledged that cases where the injured party released both settling and non-settling tortfeasors may present different considerations, yet noted that such circumstances do not apply here. Judicial economy and clearer presentation favor determining proportionate fault and damages in a single proceeding with all relevant parties present. Lexington argues that federal maritime law supports the enforcement of the Wells-Lexington assignment, likening it to Mary Carter Agreements, which the court frequently approves. However, the court finds this argument unpersuasive, noting that Mary Carter Agreements involve a secret contract for partial interest assignments, while the Wells-Lexington assignment represents an entire claim assignment requiring a separate lawsuit. This absence of the injured party in the Wells-Lexington assignment significantly distinguishes it from Mary Carter Agreements, which retain the plaintiff's active participation. Lexington contends it could not handle Wells's claims in a single case but fails to recognize the option available under Rule 14(c) for timely joinder of Eurest as a co-defendant. Lexington's late motion to join Eurest was dismissed by the court due to untimeliness. Had Lexington acted promptly, all joint tortfeasors could have been included in one trial. Ultimately, the court holds the Wells-Lexington assignment invalid and affirms the district court's February 28, 2008 order dismissing the suit. Lexington's request for an exception to the common law prohibition on personal injury claim assignments, citing DeSenne v. Jamestown Boat Yard, Inc., is deemed unpersuasive, as that case involved extraordinary circumstances that do not apply here.