USCA1 Opinion

UNITED STATES COURT OF APPEALS

UNITED STATES COURT OF APPEALS
FOR THE FIRST CIRCUIT
FOR THE FIRST CIRCUIT
____________________
No. 92-1902
MARY A. HOLBROOK, MARY E. HOLBROOK,
INDIVIDUALLY AND AS MOTHER AND
NEXT FRIEND OF DANIEL M. HOLBROOK,
Plaintiffs, Appellants,
v.
ANDERSEN CORPORATION, ET AL.,
Defendants, Appellees.
____________________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MAINE
[Hon. Gene Carter, U.S. District Judge]
___________________
____________________
Before
Boudin, Circuit Judge,
_____________
Campbell, Senior Circuit Judge,
____________________
and Stahl, Circuit Judge.
_____________
____________________

James M. Campbell with whom Michelle I. Schaffer, Ronald

__________________
_____________________
_______
Davids and Campbell & Associates were on brief for appellants.
______
_____________________
Margaret D. McGaughey, Assistant United States Attorney, w
_______________________
whom Richard S. Cohen, United States Attorney, and Paula D. Sils
________________
_____________
Senior Litigation Counsel, were on brief for appellees.
____________________
June 30, 1993
____________________

BOUDIN, Circuit Judge.

_____________

The Holbrooks'

two-and-a-half-

year-old son, Daniel Holbrook, sustained severe and permanent

injuries after
Holbrooks'
employed

falling through a second-floor

apartment.
by

the

Because plaintiff Mark

United States

accident, the United States

Navy

at

the

window of the
Holbrook was
time of

paid 80 percent of the

the

costs of

Daniel's medical treatment under the Dependent's Medical Care

Act,

10 U.S.C.

then

sued

1071 (the "Dependent's Act").

Andersen

Corporation,

the

The Holbooks

manufacturer of

the

window and screen, alleging negligence and product liability.

The Holbrooks notified the United States of the initiation of
the suit, but the United States did not intervene.
Three

days before

settled the suit

than

trial,

for $725,000.1

the complaint

had

the

Holbrooks and

This amount

sought, and

was far

the amount

reflected the parties' judgment about likelihood

Daniel Holbrook

had

been unsupervised

accident, and there were no witnesses.

not

party

to

the

agreement provide that

settlement, nor

Andersen

at the

less

presumably
of success;
time of

the

The United States was

did

the

any money should be paid

settlement
by Andersen

to the United States in respect of the medical costs that the

government

had

incurred.

The

settlement

agreement

did

____________________
1Attorneys' fees and expenses absorbed a large portion
of this amount ($391,505.50). Of the balance, the Holbrooks
were allotted a portion ($50,000) for direct expenses with
the remainder to be held in trust for Daniel.
-2-2-

provide, however, that the Holbrooks would indemnify Andersen

if the latter were held liable to the United States.

In
court

its order

approving

sua sponte
___ ______

ordered

proceeds be placed in an

the settlement,

that $139,028

the

of the

district
settlement

escrow account to satisfy potential

liens of the United States or others.2

Six months later the

United States moved to compel disbursement to it of the funds

held

in escrow,

formally
opposed

and

moved to

shortly thereafter

intervene

both motions.

motions and after a

payments

ordered

$122,834.

The

Holbrooks.

in the

The court

the United

action; the

States

Holbrooks

ultimately granted

both

recalculation of the government's actual

disbursement

balance of
The

to

the

the escrow

Holbrooks

United

States

was remitted

appeal,

arguing

of

to the

that

this

disbursement was not authorized by law.

In

claiming

settlement, the
Medical Care
Act").

This

a right

to

a portion

United States

the Holbrooks'

relies solely on

Recovery Act, 42
statute grants

of

U.S.C.
to the

2651

the Federal

("the Recovery

government a

right to

recover from a third-party tortfeasor the reasonable value of

medical services that the

government has furnished under the

____________________
2Local rules required court approval of settlements of
claims brought on behalf of minor children.
The court's
escrow order may have been prompted by the Holbrooks'
statement in
their motion for court
approval of the
settlement that the Navy had paid 80 percent of the medical
bills and that the total medical expenses amounted to
$139,028.
-3-

-3-

Dependent's

Act

(or

under

other

similar

statutes).

Specifically, the Recovery Act provides:

In any action in which the United States is
authorized or required by law to furnish hospital,
medical, surgical, or dental care and treatment . .
. to a person who is injured or suffers a disease,
after the
effective date of this Act, under
circumstances creating a tort liability upon some
third person . . . to pay damages therefor, the
United States shall have a right to recover from
said third person the reasonable value of the care
and treatment so furnished or to be furnished and
shall, as to this right be subrogated to any right
or claim that the injured person . . . has against
such third person to the extent of the reasonable
value of the care and treatment so furnished or to
be furnished.
42

U.S.C.

for the

2651(a).

The statute then sets forth procedures

government's enforcement of this

The United States

may "intervene

proceeding brought by the injured

such an

action

is

not

right of recovery.

or join in

any action

or diseased person" or, if

commenced within

six

months,

"institute and prosecute legal proceedings against

person

who

is liable

for the

or

injury or

may

the third

disease."

Id.
__

2651(b).
The parties direct their

arguments in this case chiefly

at the procedural component

of the statute, section 2651(b).

The

the

Holbrooks

argue

that

United

States'

motion

to

intervene came too late, because it was not filed until after
the

Holbrooks'

settlement.
law

suit

against

Andersen

The United States responds

providing

that

the

was

resolved

by

by pointing to case

procedural devices

set

forth

in

a motion

to

after entry

of

-4-4-

section

2651(b)

intervene may be
judgment.

are

not exclusive

filed "at

that

any time," even

United States v. Merrigan, 389 F.2d

___________________________

Cir. 1968); see

___

also United States v. York,

____ ______________________

585-86 (6th Cir. 1968).

not

and

We

21, 25

398 F.2d

think that the crucial issue

(3d
582,
is

when the government may intervene but rather whom it may

____
____

proceed against once it makes an appearance in the case.

The statute

grants

recover "from [the] third

the injury.

It

to the

United

States a

person" who is liable in

makes no provision for the

right

to

tort for

United States to

recover

against

the

injured

unconditionally paid to the

Moreover,
statute

the

liability

upon some

right

to

upon "circumstances
third

Thomas v. Shelton,
___________________

or

740

from

funds

injured party by the tortfeasor.

United States'

is contingent

party

party."
F.2d

478,

recover under

the

creating a

tort

42

U.S.C.

481

(7th

2651(a);
Cir.

1984)

(tortfeasors' "liability under the Medical Care Recovery

depends on their being found liable

Act

. . . under the tort law

of the pertinent state"); United States v. Trammel, 899 F.2d

_________________________
1483,

1488 (6th Cir.

1990) (same).

There

has been no such

determination in this case.

"All
agreed

courts

that

the

which have
statute

considered
gives

the

the

question have

United

States

an

independent right of recovery against the tortfeasor . . . ."

United States v. Housing Authority of Bremerton,
__________________________________________________

415 F.2d

-5-5-

239, 241 (9th Cir 1969).

Thus, the government's right is not

extinguished

by the injured

with the tortfeasor.

674 F. Supp. 395
right against
defeated
injured
for

See,
___

person's settlement and release

e.g., United States v. Theriaque,
____ __________________________

(D. Mass. 1987).

Indeed,

the tortfeasor under

even by

certain

United

States

the Recovery Act

restrictions that

person's own recovery.3

the

the government's

to

is not

might bar

the

There is thus no necessity

look

to

the

injured

party's

settlement for compensation.

If the United States
to recover its medical
under

the plain

against

Andersen

liability.

language
and

of the

seek

to

tortfeasor.

Nor

absent

statute
establish

between

is there any case

an express

proceed

Andersen's

tort

not authorize

the Recovery Act

the injured

think that

it must

the statute does

collect under

settlement negotiated

Recovery Act

payments in this case, we

The language of

the government to

recovery

wishes to invoke the

out of

person

and

law that permits such

agreement

designating for

a
the
a
the

government a portion of the settlement.

This

case

does

not

involve

Cockerham v. Garvin,
____________________

768

F.2d 784,

the
787

peculiar

facts

(6th Cir.

of

1985).

____________________
3See Heusle v. National Mutual Ins. Co., 628 F.2d 833,
___ ___________________________________
837 (3d Cir. 1980) (procedural restrictions); United States
______________
v. Moore, 469 F.2d 788, 790 (3d Cir. 1972) (state doctrine of
________
interspousal immunity), cert. denied, 411 U.S. 905 (1973);

____ ______
United States v. Gera, 409 F.2d 117, 119-20
______________________
(state statute of limitations).

(3d Cir. 1969)

-6-6-

There the

Sixth Circuit

allowed recovery out

proceeds

where

[injured

"[t]he

specifically agreed that part

[injured person] would be
the [United
court

tortfeasor

of the money paid over

held in escrow pending a

the

escrow

"beneficiary" status akin to

beneficiary of a contract.
that

settlement

and

to the
claim by

States] for specific medical bills . . . ."

treated

decided

person]

of settlement

on

remand

should

be

as

giving

the

The

government

that enjoyed by the third-party

See id. at 784.
___ __
the

The

government's

determined

considerations," taking account of any

court also

share
by

of

the

"equitable

discounted settlement

accepted by the victim and the litigation costs he had borne.

Id. at 787.
__
there was

The government does not argue that

any third-part

Holbrooks and Andersen.

beneficiary agreement

in this case
between the

Rather, the
has

been

recover
but

United States

misunderstood.

says that its

It argues

rather,

consistent with

that does

Andersen has
exchange

its

attempt to

from the escrow is not a claim against the Holbrooks

the Recovery

against Andersen, which supplied

game

that

present claim

for

not reflect

Act, is

the funds.

the reality

a release

of claims

belongs to the Holbrooks and

This is

of the

paid the settlement amount to

____

a claim
a word

situation:

the Holbrooks in

against

it.

The money

their son quite as much

as Mr.

-7-7-

Holbrook's salary paid to him by the Navy belongs

to him and

not to the Navy which is the source of the funds.

The

best argument

policy considerations.
is not technically
408, but

for the

United States

is based

on

Andersen's payment to

the Holbrooks

an admission of liability,

Fed. R. Evid.

in reality the

settlement reflects

a judgment

Andersen that there is a risk of liability and that the

by
case

is worth

that

tortfeasor
issue

much

to

is liable

mooted

by the

settle.

to

But

to the extent
_______________

the Holbrooks

settlement--it is

the

under tort

law--an

also liable

to the

United States for any medical costs paid by the latter.

Of course the

right to

sue

independently and, if it can prove liability, to collect

its

full
But

United States

medical expenses
everyone

knows

tortfeasor settles

with no
that

settlement discount

if

with the

still has a

fault

is

at all.

debatable and

injured party, the

the

chances for

the United States to recover may be much reduced.

Any lawyer

would prefer to try a tort case in which the co-plaintiff

an

injured

two-and-a-half-year

old,

especially

where

is
a

verdict for the child virtually requires an award for the colitigant.
What is
an

even more troubling is that

incentive in

such

case

something extra in settlement

the two claims.

to

pay

the tortfeasor has

the

injured

party

precisely in order to uncouple

Once the United States is

-8-8-

left to litigate

on its own, it not only has no sympathetic victim to take the

lead before

the

expenses.

jury

but

And, if (as

indemnity

agreement

must

bear

its

here) the alleged

with

the

victim,

own

litigation

tortfeasor has an
making

the

latter

responsible for any award to the United States, the victim or

witnesses

associated with

the victim

incentive to minimize the

now have

an economic

tortfeasor's fault when the United

States sues.
These policy concerns are
States is not without
has the

benefit

of

it anticipated

provided

much

discovery

its

solution

an

the

testimony.
have

lines

the

of

is whether

the United States

"equitable" share

by the court.

cannot anticipate

question posed

by

might well

along the

and victim settle,

medical costs

to so--it

done

cabin the witnesses'

problem, Congress

settlement to be determined
not

already

case it

The Recovery Act could easily have said that

if the tortfeasor
claim for

the

legislative

Cockerham case:
_________

the United

litigation resources, in this

Holbrooks, and perjury laws

Had

not overwhelming:

But

the

Congress did

every problem--and

the courts should

of

can

do the

so the
repair

work themselves.
The answer here, we think, is

no.

The statute does not

literally forbid this "equitable share" solution, but neither

do the provisions of this reasonably detailed statute provide
for any such

recovery against the

victim or the

settlement

-9-9-

fund.

Nor can we

be certain

that Congress

would wish

to

impose an "equitable share" solution; perhaps it might pick a

quite different solution or no solution

at all.

There is no

magic formula to say when courts should do patch-work repairs

to legislation, but in our view this is not such a
Congress wants a

solution, it is best

case.

for it to tailor

own.
The judgment of the district court is reversed.
________

If
its

-10-10-