JAMES E. TOMLINSON and DARLENE
TOMLINSON, his
wife, Plaintiffs,
v.
WILLIAM J. LANDERS,
Defendant.
Case No. 3:07-cv-1180-J-TEM.
United States District Court, M.D. Florida, Jacksonville
Division.
April 24, 2009.
ORDER AND OPINION
THOMAS E. MORRIS, Magistrate Judge.
I. Procedural Posture
This matter is before the Court on Defendant William J. Landers' ("Defendant")
Motion(s) to Enforce Settlement and for Dismissal (Docs. #24, #26, Motion
to Enforce Settlement),[1] Plaintiffs' response in opposition thereto (Doc.
#29), Defendant's Amended Motion to Amend Affirmative Defenses (Doc. #38,
Motion to Amend), and Plaintiffs' response in opposition to Defendant's
Motion to Amend (Doc. #43).
In the Motion to Enforce Settlement (Doc. #26), Defendant seeks to
enforce an alleged settlement agreement between Defendant and Plaintiffs,
James E. Tomlinson
and his wife Darlene Tomlinson
(collectively "Plaintiffs"). Upon review of the record, the Court found
the issues addressed by the parties were fully briefed and determined oral
argument would not benefit the Court in making its determinations.
Accordingly, the Court has decided the matter on the written record. For
the reasons set out herein, Defendant's Motion to Enforce Settlement (Doc.
#26) shall be denied. Consequently, Defendant's Motion to Amend (Doc. #38)
shall be denied as futile.[2]
II. Background Facts
On February 24, 2007, Plaintiff James Tomlinson and
Defendant were involved in an automobile accident (Doc. #1 at 2). On June
20, 2007, Plaintiffs' attorney wrote a letter to Defendant's insurer,
Millers Classified Insurance Company ("MCIC"), demanding Defendant's
policy limits of $100,000 in order to settle the claim for bodily injury
resulting from the accident at issue (Doc. #24-2). On June 21, 2007,
Plaintiffs' insurance carrier, Auto-Owners Insurance ("Auto-Owners"), paid
Plaintiffs $50,000 for Plaintiff James Tomlinson's injuries
and indicated that Auto-Owners would waive its subrogation rights against
Defendant and MCIC (Doc. #29 at 11, Exhibit 2).
Approximately five months later, on November 14, 2007, Plaintiffs'
attorney wrote MCIC another letter, informing MCIC of Auto-Owners' payment
to Plaintiffs (Doc. #29 at 12-13, Exhibit 3). In said letter, Plaintiffs'
attorney indicated that Plaintiffs would consider MCIC was acting in bad
faith unless $100,000 was tendered to Plaintiffs within ten days of the
date of the letter (Doc. #29 at 12-13, Exhibit 3). Six days later, on
November 20, 2007, MCIC tendered a check for $100,000, made payable to
Plaintiffs, their attorney, and to Medicare (Doc. #29 at 15-16, Exhibit
5). The check stub provided, "payment will clear when properly signed
release is received in our [MCIC's] office" (Doc. #29 at 15-16, Exhibit
5). MCIC included a release that it desired Plaintiffs sign and return to
MCIC (Doc. #29 at 14, Exhibit 4). The check stub additionally provided,
"proper endorsements are required for all payees" (Doc. #29 at 15-16,
Exhibit 5).
On November 29, 2007, Plaintiffs' attorney wrote MCIC a letter,
rejecting and returning the $100,000 settlement check because, inter
alia, Medicare was listed as a payee (see Doc. #24-4).[3] Plaintiffs' attorney requested that MCIC issue a
check without Medicare listed as a payee, and further indicated that
Plaintiffs would resolve the Medicare lien directly with Medicare and
would agree to hold MCIC harmless for any Medicare claims (Doc. #24-4). In
addition, Plaintiffs' attorney demanded that certain language contained
within the release be removed as inappropriate (Doc. #24-4, Doc. #29 at
14, Exhibit 4).
On December 4, 2007, Centers for Medicare & Medicaid Services
("CMS") wrote MCIC a letter indicating Medicare had been advised that MCIC
may have been a responsible payer for Plaintiff James Tomlinson's injuries,
and that the Medicare Secondary Payer Act, 42 U.S.C. § 1395y(b)(2), et.
seq., may require MCIC to reimburse Medicare for conditional payments made
on behalf of Plaintiff James Tomlinson (i.e.
payments made by Medicare prior to payments made by MCIC) (Doc. #24-5 at
3-4).
On December 7, 2007, MCIC wrote to Plaintiffs' attorney and stated that
because Medicare had a lien on settlement proceeds and because the
Medicare Secondary Payer Act ("MSPA") and Code of Federal Regulations
provide that MCIC may be responsible for Medicare reimbursement despite
any payment by MCIC to Plaintiffs, MCIC would not rely on a promise
(hold-harmless agreement) from Plaintiffs to satisfy the Medicare lien
(Doc. #24-5 at 1-2). MCIC offered to reissue the check as previously
issued or to issue a check directly to Medicare for the amount of the lien
once MCIC received documentation from Medicare stating the exact amount of
the lien (Doc. #24-5). MCIC included a new release that omitted some, but
not all, of the language Plaintiffs' attorney struck from the prior
release (Doc. #29 at 17, Exhibit 6). Plaintiffs did not respond to the
aforementioned correspondence, and on December 14, 2007 Plaintiffs filed
the instant lawsuit against Defendant (Doc. #1). On January 29, 2009,
Defendant filed the instant Motion(s) to Enforce Settlement and For
Dismissal (Docs. #24, #26).
III. Analysis
The issue before the Court is whether an enforceable settlement
agreement was formed between the parties. In his Motion to Enforce
Settlement (Doc. #26), Defendant argues that all the essential terms of
the proposed settlement were agreed upon once MCIC tendered a check for
Defendant's policy limits of $100,000 (made payable to Plaintiffs,
Plaintiffs' attorney, and Medicare) because Plaintiffs demanded payment of
Defendant's insurance policy limits and MCIC complied (Doc. #26 at 1-3).
Defendant supports his argument by claiming the settlement agreement was
not invalidated because MCIC, "determined it could not violate federal law
by not taking responsibility for protecting Medicare's lien as the
[Medicare] Secondary Payer Act requires" (Doc #26 at 1-3). Defendant's
argument is not persuasive for the reasons that follow.
1. No Settlement Agreement was Consummated Between the Parties Because
No Meeting of the Minds Ever Occurred Regarding Material Terms of the
Proposed Agreement
As a preliminary matter, the Court would point out that Defendant's
instant motion does not mention the fact that MCIC submitted a second
proposed release to Plaintiffs after Plaintiffs' attorney expressed
concern over (and struck) certain portions of the release language
contained within the first proposed release (see Docs. #24, #26;
see also Doc. #29 at 14, Exhibit 4). Defendant merely presents that
all essential terms of the proposed settlement were accepted once MCIC
agreed to pay its insured's policy limits and tendered a check for that
amount (Doc. #26 at 1-3). Defendant, however, fails to address the
parties' dispute over the proposed release language and their exchange of
correspondence regarding the same (Docs. #24, #26). Defendant cites case
law regarding the enforceability of settlement agreements and the need for
a meeting of the minds as to only the essential terms of a settlement
agreement in order to be enforceable; however, Defendant merely cites the
law and does not apply the law to all of the pertinent facts relevant to
the resolution of the instant motion (Doc. #24 at 8).
Federal courts have inherent authority to summarily enforce settlement
agreements entered into by litigants in a pending case. Ford v. Citizens & So.
Nat. Bank, Cartersville, 328 F.2d 1118, 1121 (11th Cir. 1991).
Additionally, this Court must look to Florida law when deciding whether
the parties reached a settlement agreement that is enforceable. BP
Products North America, Inc. v. Oakridge at
Winegard, Inc., 469 F. Supp. 2d 1128, 1133 (M.D. Fla. 2007).
In Florida, settlement agreements are governed by the law of contracts.
See Williams
v. Ingram, 605
So.2d 890, 893 (Fla. Dist. Ct. App.1992). In a case almost directly on
point to the instant matter, the First District Court of Appeal of Florida
(the "First DCA") held: (1) the parties' dispute over language contained
in a proposed settlement release by an insurance company constituted a
lack of assent to an essential term of the parties' proposed settlement
agreement; (2) the insurer's tender of a settlement check within the time
limits stated in the offer did not constitute completion of the settlement
agreement; and (3) the insurer's subsequent submission of releases without
objectionable terms was a new offer that the plaintiffs in that case were
not obligated to accept. Nichols
v. The Hartford
Insurance Company of the Midwest, 834 So.2d 217, 220 (Fla. Dist. Ct.
App. 2002).
In Nichols, the plaintiffs were injured when their vehicle was
struck by a vehicle insured by the Hartford Insurance Company of the
Midwest (the "Hartford"). Id. at 218. The plaintiffs' attorney
wrote a demand letter to the Hartford for its insured's policy limits.
Id. at 218-19. The Hartford responded with settlement checks and
written releases. Id. at 218-19. The plaintiffs' attorney objected
to the language in the releases and the Hartford responded with releases
that omitted all of the language the plaintiffs found objectionable.
Id. at 219. The plaintiffs did not respond to the new releases and
the Hartford filed a declaratory action to enforce the settlement
agreement between the parties. Id. The trial court entered an order
granting summary judgment in favor of the Hartford and the plaintiffs
appealed. Id.
On appeal, the First DCA determined the objectionable release language
(an indemnification clause) was an essential term of the proposed
settlement agreement and that there was no meeting of the minds between
the parties because said language was not agreed upon. Id. at
219-20. The Hartford argued that the tender of the settlement checks
constituted completion of the settlement agreement despite the fact the
parties disagreed about the indemnification language. Id. at 220.
The First DCA, however, found the mere tender of the checks did not
consummate the settlement agreement because, inter alia, the
Hartford conditioned the cashing of the settlement checks on the parties
mutual assent to the terms of the proposed releases. Id. at
220.
The Hartford further argued that the plaintiffs' failure to respond
after the Hartford removed the objectionable language from the releases
indicated assent to the revised release language. Id. The First DCA
concluded, however, that the Hartford's removal of the indemnification
language constituted a new offer, and that the plaintiffs were not
obligated to accept the new offer. Id.
In the instant case, the Court finds there was no meeting of the minds
with regard to the alleged settlement agreement. As an initial matter, the
Court finds the terms of the release to be an essential element of any
proposed settlement. Plaintiffs' attorney expressed concerns about the
proposed release language in the first release, and the second release
submitted by MCIC omitted some, but not all, of the language Plaintiffs'
attorney's struck from the first release.[4] As in Nichols, the submission of the
second proposed release constituted a counteroffer, which Plaintiffs were
not obligated to accept. See Id.
Moreover, Plaintiffs objected to MCIC's insistence on the inclusion of
Medicare as a payee on the settlement check (Doc. #29 at 2, 7).[5] The Court finds this was an essential term of the
agreement since Plaintiffs aver they wanted to resolve any Medicare liens
on their own accord (see Doc. #29 at 17). Plaintiffs offered to
sign a hold harmless agreement with MCIC (Doc. #24-4). This proposition
was rejected by MCIC in its December 7, 2007 letter to Plaintiffs'
attorney (Doc. #24-5). The Court finds it readily apparent that the
parties were engaged in ongoing negotiations regarding the inclusion, or
lack thereof, of Medicare as a payee on the settlement check, and that no
meeting of the minds ever occurred regarding this point of contention
between the parties.
Consequently, Defendant's argument that all essential terms of the
settlement demand were accepted when MCIC tendered a check for its
insured's policy limits necessarily fails—especially in light of the fact
the check stub stated, "payment will clear when properly signed release is
received in our [MCIC's] office" (Doc. #29 at 15, Exhibit 5).
The Court finds the mere tender of a settlement check by MCIC did not
constitute an acceptance of the settlement demand that would have bound
the parties—primarily because payment by MCIC was conditioned upon
Plaintiffs agreeing to be bound by MCIC's proposed release. The proposed
release submitted by MCIC contained language that Plaintiffs' attorney
deemed inappropriate, and Plaintiffs' attorney struck said language from
the document (Doc. #29 at 14). MCIC responded by deleting some, but not
all, of the language objected to by Plaintiffs (Doc. #29 at 17).
Accordingly, the Court finds MCIC made a counteroffer to Plaintiffs when
it submitted the second proposed release, and Plaintiffs were not
obligated to accept this counteroffer. See Nichols,
834 So.2d at 220
Here, unlike the situation in Nichols where the insurance
company removed all of the language the plaintiffs' attorney found
inappropriate, MCIC only removed some of the language Plaintiffs found
inappropriate; therefore, the Court finds an even stronger argument exists
for determining MCIC's submission of a second proposed release reveals
that negotiations were ongoing, and that there was never a meeting of the
minds between the parties regarding an essential element of the proposed
settlement agreement.
Based on the foregoing, the Court finds the second release submitted to
Plaintiffs by MCIC was a counteroffer that Plaintiffs were not obligated
to accept. The Court additionally finds that the parties dispute over
whether Medicare should have been listed as a payee on the settlement
check was a dispute over an essential term of the agreement, and that
negotiations over this issue were ongoing prior to Plaintiffs filing suit.
Accordingly, the Court finds no enforceable settlement agreement was ever
consummated between the parties.
2. Defendant Misconstrues the Medicare Secondary Payer Act and the
Code of Federal Regulations
As previously stated, Defendant supports his argument by claiming the
alleged settlement agreement was not invalidated when MCIC, "determined it
could not violate federal law by not taking responsibility for protecting
Medicare's lien as the [Medicare] Secondary Payer Act requires" (Doc #24
at 3). It appears that Defendant is arguing MCIC was required by law to
list Medicare as a payee on the settlement check and that, because MCIC
had no option other than to include Medicare as a payee, Plaintiffs were
bound to accept the settlement check with Medicare listed as a payee
(see Doc. #26 at 1-3). This argument is without merit for the
reasons that follow.
Defendant references the Medicare Secondary Payer Act ("MSPA"), which
provides that an insurer shall reimburse Medicare for any payments it has
made to a beneficiary if the insurer had a responsibility for making such
payments (Doc. #24 at 3-7). Review of the MSPA and the relevant provisions
of the Code of Federal Regulations reveals that an insurer may be
obligated to reimburse Medicare in certain instances; however, insurers do
not have an affirmative legal duty to make direct payment to Medicare in
all instances, as Defendant suggests.
To illustrate, 42 C.F.R. § 411.24 states in pertinent part:
(h). Reimbursement to Medicare. If the beneficiary or other
party receives a primary payment,[6] the beneficiary or other party must reimburse
Medicare within 60 days.
(i). Special Rules.
(1) In the case of liability insurance settlements and
disputed claims under employer group health plans, workers' compensation
insurance or plan, and no-fault insurance, the following rule applies:
If Medicare is not reimbursed as required by paragraph (h) of this
section, the primary payer must reimburse Medicare even though it has
already reimbursed the beneficiary or other party.
(2) The provisions of paragraph (i)(1) of this section also
apply if a primary payer makes its payment to an entity other than
Medicare when it is, or should be, aware that Medicare has made a
conditional primary payment.
42 C.F.R. § 411.24(h), (i)(1)-(2) (emphasis added).
As set forth above, federal law does not mandate that a primary payer
(or insurer) make payment directly to Medicare; however, an insurer may be
liable to Medicare if the beneficiary/payee does not reimburse Medicare
for any amounts owed to Medicare within sixty (60) days, supra.
As stated in its letter to Plaintiffs' attorney, MCIC was concerned
that Plaintiffs would not reimburse Medicare and that MCIC would remain
liable to Medicare regardless of whether it paid Plaintiffs (Doc. #24-5).
Notwithstanding Plaintiffs' attorney's offer to sign an agreement that
would hold MCIC harmless for any Medicare liens, MCIC insisted that
Medicare be included as a payee on the settlement check (see Docs.
#24-4; #24-5).
Contrary to Defendant's assertion, MCIC would not have violated federal
law if it omitted Medicare from the settlement check. MCIC's decision list
Medicare as a payee on the settlement check may have been in MCIC's best
interest; however, MCIC was not required by federal law to include
Medicare on the settlement check. The fact the parties were in dispute
over this issue supports Plaintiffs' argument that there was never a
meeting of the minds regarding the manner in which payment was to be
tendered to Plaintiffs.
3. Amendment of Defendant's Affirmative Defenses Would be Futile
Defendant additionally moves the Court to allow him to amend his answer
and affirmative defenses to add the affirmative defense of accord and
satisfaction (Doc. #38). The Court, having found no settlement agreement
was ever consummated between the parties, finds said motion is due to be
denied as futile.
Defendant cites Taylor
v. Florida State
Fair Authority, 875 F.Supp. 812, 814 (M.D. Fla. 1995) (citing
Foman
v. Davis, 371
U.S. 178 (1962)) for the proposition that a court should deny leave to
amend a pleading only when: (1) the amendment would be prejudicial to the
opposing party; (2) there has been bad faith or undue delay on the part of
the moving party; or (3) an amendment would be futile (Doc. #27 at 5). As
stated herein, the Court has found no enforceable settlement agreement was
reached between the parties; therefore, amendment of Defendant's
affirmative defenses to include the defense of accord and satisfaction
would be futile.
IV. Conclusion
As stated herein, it is hereby ORDERED:
1. Defendant's Motion(s) to Enforce Settlement and for
Dismissal (Docs. #24, #26) are DENIED.
2. Defendant's Amended Motion to Amend Affirmative Defenses
(Doc. #38) is DENIED as futile.
DONE AND ORDERED.
[1] Defendant filed his first motion to enforce settlement
and for dismissal (Doc. #24), which is duplicative of the second motion,
Document #26. The first motion to enforce settlement and for dismissal
(Doc. #24) contains exhibits that are not contained within Document #26.
Therefore, for the purpose of this Order and Opinion, the Court will
consider both motions in combination. Although the Court will primarily
refer to Document #26 throughout this Order and Opinion since Plaintiffs
only filed a response to Document #26, the Court will nevertheless cite to
the various exhibit(s) of each respective document, as
necessary.
[2] As discussed infra, the Court's decision to deny
as futile Defendant's Motion to Amend (Doc. #38) is predicated upon the
Court's denial of Defendant's Motion to Enforce Settlement (Doc.
#26).
[3] Medicare paid certain benefits on behalf of Plaintiff
James Tomlinson,
and therefore, would likely be entitled to a lien against a portion of any
settlement proceeds paid to Plaintiff (see Doc. #24-6 at
3-8).
[4] Plaintiffs did not want to agree to a release that
reserved for Defendant the right to sue Plaintiffs for Defendant's
injuries or property damage (Doc. #29 at 6).
[5] The merit of Defendant's claim that MCIC was required by
federal law to include Medicare on the settlement check is discussed
infra.
[6] A primary payer is any entity that is or was required or
responsible to make payment with respect to an item or service (or any
portion thereof) under a primary plan. These entities include, but are not
limited to, insurers or self-insurers, third party administrators, and all
employers that sponsor or contribute to group health plans or large group
health plans. 42 C.F.R. § 411.2.