South Down Liquors, Inc. v. Hayes

WILNER, Judge. This appeal presents a single narrow question: where an employer/insurer has paid workers’ compensation benefits to an injured employee and the employee, pursuant to Md.Ann.Code art. 101, § 58, thereafter sues the party who caused the injury, can that third party compel the employer/insurer to join the action as a co-plaintiff on the ground that the employer/insurer is a “real party in interest”? Our answer is “no.” The facts here are simple and undisputed. Roy Hayes, appellee, was employed as a delivery man by Chesapeake Bay Distributing Company.

While in the course of delivering beer to one of Chesapeake’s customers, South Down Liquors, Inc., Hayes was injured when a piece of equipment he was using fell into a hole in the floor of South Down’s storage trailer. He filed a worker’s compensation claim against Chesapeake and eventually was awarded compensation of $37,323. Hayes then filed this action against South Down in the Circuit Court for Anne Arundel County alleging negligence in allowing the hole in the floor to exist. When, in response to interrogatories, Hayes disclosed the compensation award, South Down moved to have Chesapeake’s compensation insurer, Selective Insurance Compa ⁴⁶⁶ ny, joined as a party plaintiff.

It urged that, as Selective had “a statutory lien against any recovery by the Plaintiff,” it was a "‘real party in interest” and therefore was required to join as a co-plaintiff under Md. Rule 2-201. Hayes resisted that motion, arguing that any question of required joinder was governed by Md. Rule 2-211 and that joinder of Selective wai not mandatory under that rule. Agreeing that Rule 2-211 did not require that Selective be joined as a party, the court denied South Down’s motion, whereupon this appeal was filed. 1 The issue presented here requires an examination of the two Rules cited — -Rules 2-201 and 2-211 — and how they relate to, and are affected by, Md.Ann.Code art. 101, § 58. We shall begin with the statute.

Section 58 sets forth the respective rights of an injured employee and his employer where, as here, the employee suffers an injury that may entitle him to both worker’s compensation benefits from his employer and damages from some third party who caused the injury. It begins by purporting to give the employee an initial option: he may sue the third party at law or he may seek compensation under the Act. 2 If he seeks, and receives, an award of ⁴⁶⁷ compensation, both he and his employer (or the employer’s insurer, if the employer is insured) may then proceed against the third party. For the first two months following passage of the Commission’s award, the employer/insurer has the exclusive right to bring an action to “enforce for their benefit ... the liability of such other person.” If, in such an action, damages are recovered in excess of the compensation paid, the excess, less the cost and expense of bringing the action, “shall be paid to the injured employee____” If the employer/insurer fails to bring such an action within the two-month period, the employee may sue the third party. If he does so and gets a recovery, the recovery goes, first, to reimburse him for the cost and expense of the action, second, to reimburse the employer/insurer for the compensation paid or awarded, and, last, to the employee.

With the gloss of case law, § 58, in effect, affords an employer/insurer three “rights” to proceed against the third party, and it affords the employee two such “rights.” During the first two months following passage of the award, the employer/insurer has the sole, exclusive right to sue the third party; thereafter, it has a concurrent right with the employee to bring the action; and, during that period of concurrency, it has a right under Md. Rule 2-212 (Permissive Joinder of Parties) to intervene in any action brought initially by the employee. See Collins v. United Pacific Ins. Co., 315 Md. 141 , 148 n. 5, 553 A.2d 707 (1989), and cases cited therein. The employee has no exclusive right comparable to that of the employer/insurer.

He does, however, have the concurrent right to sue after the expiration of the two-month period and, if an action is brought by ⁴⁶⁸ the employer/insurer, he would have the right under Rule 2-212 to intervene in it. Rule 2-201 states, in relevant part: “Every action shall be prosecuted in the name of the real party in interest, except that an executor, administrator, personal representative, guardian, bailee, trustee of an express trust, person with whom or in whose name a contract has been made for the benefit of another, receiver, trustee of a bankrupt, assignee for the benefit of creditors, or a person authorized by statute or rule may bring an action without joining the persons for whom the action is brought.” South Down’s position is based on the first clause of Rule 2-201 — the command that “[ejvery action shall be prosecuted in the name of the real party in interest.” Because of its statutory right of subrogation — its right to reimbursement from the proceeds of any award recovered from the third party — the employer/insurer is, under South Down’s view, necessarily a real party in interest in an action brought by the employee. South Down observes that, in every circumstance contemplated by § 58 but this, the employer/insurer will be a named-plaintiff. Only where the employee, during the period of concurrency, brings the action in his own name is it possible for the employer/insurer not to be a plaintiff, and that gap, it insists, is filled by Rule 2-201.

Hayes, naturally, has a quite different view. He essentially ignores Rule 2-201 and looks only to Rule 2-211, dealing with the required joinder of parties. Under the criteria set forth in that Rule, he argues, Selective is not required to be joined as a plaintiff. Rule 2-211 provides, in relevant part: “Except as otherwise provided by law, a person who is subject to service of process shall be joined as a party in the action if in the person’s absence ⁴⁶⁹ (1) complete relief cannot be accorded among those already parties, or (2) disposition of the action may impair or impede the person’s ability to protect a claimed interest relating to the subject of the action or may leave persons already parties subject to a substantial risk of incurring multiple or inconsistent obligations by reason of the person’s claimed interest.” None of these conditions, Hayes asserts, pertains here.

Selective’s right to reimbursement is fully protected by statute and is dischargeable only from whatever recovery may be obtained by Hayes. South Down will not — cannot— face another action by Selective, whatever may be the outcome of this case. Accordingly, the absence of Selective as a party will not (1) prevent complete relief from being accorded among those already parties, (2) impair or impede Selective’s rights in any way, or (3) put South Down at risk of incurring multiple or inconsistent obligations. The question of compulsory joinder of a subrogated employer/insurer has been presented to and discussed by the Court of Appeals in some earlier cases, but it does not appear to have been clearly and definitively resolved.

The law elsewhere, particularly in Federal court interpretations of Fed.R.Civ.P. 17(a), is somewhat in conflict. The issue was first considered by the Court of Appeals in Stark v. Gripp, 150 Md. 655 , 133 A. 338 (1926). The plaintiff there was injured on the job in an automobile accident. He collected compensation from his employer and then sued, and recovered a judgment against, the third party causing the accident.

The defendant appealed arguing, according to the Court, that “the right of the employer or insurer to reimbursement for compensation paid and incidental expenses, secured them by section 58 of the act, should, in a suit by the workman, be protected by having the suit instituted to their use, pro tanto, and the amount recovered apportioned in the verdict and judgment.” Id. at ⁴⁷⁰ 658, 133 A. 338 . 3 The Court rejected the argument so framed by it, holding at 658-59, 133 A. 338 : “Even if that should be true, these appellants would have no interest to be protected by entering the suit so, or by having the judgment against them so apportioned, and they could not ask that the judgment be reversed for lack of these things. And the statute does not require them. Unlike the statute on death by negligence (Code, article 67), this statute contains no requirement as to the form or title of the suit, and requires no apportionment. It speaks of a suit to be brought and prosecuted by the injured workman to enforce the liability, and provides only that from damages recovered the employer or insurer shall be reimbursed.

See Bethlehem Steel Co. v. Variety Co., 139 Md. 313, 326 [ 115 A. 59 ]. It may not be improper, in a suit under section 58, to entitle the case as contended for, and to have the jury make an apportionment of the amount in their verdict, but it is not necessary that it should be done.” (Emphasis added.) The issue of involuntary joinder of an employer arose again, in a quite different context, in Baltimore Transit Co. v. State, 183 Md. 674 , 39 A.2d 858 (1944). That action stemmed from a fatal injury suffered by an employee of Baltimore City when a truck in which he was riding was struck by a streetcar. The City, as a self-insured employer, paid compensation benefits to the decedent’s - dependents, who then sued the transit company and the owner and driver of the truck.

The transit company filed a third party ⁴⁷¹ claim against the City, asserting that the driver of the truck was the City’s agent, that the City was therefore responsible for his negligence, and that it was liable under the Joint Tortfeasors Act. The City, contending that its liability was limited by the Workmen’s Compensation Act, obtained an order striking the third party claim, and that order became an issue raised by the transit company on appeal. That issue, of course, is different from the one now before us; we are concerned with whether the employer/insurer can be compelled to join as a plaintiff, not whether the employer can be sued as a third party defendant. But in discussing the issue raised by the transit company, the Court, citing Stark v. Gripp, stated, without qualification, that “[s]ince the statute [§ 58] fixed the right to reimbursement, the employer or insurer is not a necessary party to a suit by the employee.” 188 Md. at 678, 39 A.2d 858 .

In City of Baltimore v. Moore, 209 Md. 516 , 121 A.2d 857 (1956), the question now before us was squarely presented; the City, a defendant in an employee’s action under § 58, appealed the refusal of the trial court to direct that the employer be made a co-plaintiff. Because the appeal was found to be untimely, however, the Court avoided the need to address the issue. 4 The next, and penultimate, consideration of the issue under Maryland law came in Jefferson v. Ametek, 86 F.R.D. 425 (D.Md.1980). The employee there, a Maryland resident, was injured on the job and collected worker’s compensation from her employer’s insurer, IN A, whose principal place of business was in Pennsylvania. She then brought suit in the U.S. District Court against Ametek, Inc., whose principal place of business was also in Pennsylvania, claiming that it was responsible for her injury.

She sued for her own use and to the use of IN A, and the issue arose as to whether, ⁴⁷² due to INA and Ametek both being regarded as Pennsylvania citizens, there was the complete diversity necessary for jurisdiction under 28 U.S.C. § 1332 . That, in turn, depended on INA’s status, in particular, whether it was a “properly named party.” Ametek argued that INA was indeed a “properly named party,” that, as a subrogated party under § 58, it was, in fact, a necessary party in interest. The Court (Judge Blair) rejected that argument, noting at 427 “the statutory underpinning for the present cause of action. The Maryland Workmen’s Compensation Act expressly authorizes Jefferson, as an ‘injured employee,’ to bring suit in her own name against the third party allegedly liable for her injuries.

Md. Code Ann., Art. 101, § 58 (1979 supp.). Under both the federal and state rules, a party so authorized by statute is entitled to sue ‘in his own name without joining with him the party [person] for whose benefit the action is brought.’ Fed.R. Civ.P. 17(a); Maryland Rule 203(b)(10). Thus, unlike a case involving an insurer fully subrogated to the rights of its insured against a third party tortfeasor, this action is one in which there are two real parties in interest, either of which is capable of bringing the action in its own name. ” (Emphasis added.) The issue was touched on most recently in Collins v. United Pacific Ins. Co., 315 Md. 141 , 553 A.2d 707 (1989).

As here, an employee brought a third party action after receiving compensation. The employer/insurer was eventually added, by the employee and without objection, as a “use plaintiff,” and its attorney participated to some extent in the trial of the case. The question before the Court was the extent to which the employer/insurer should share in the costs, expenses, and attorneys’ fees incurred by the employee in prosecuting the action. In considering that issue, the Court discussed Thomas v. Aetna Casualty and Surety Company, 473 F.2d 164 (D.C.Cir.1972), noting that, in that case, the employee had brought a third party action “and the tort-feasor required the joinder of the compensa ⁴⁷³ tion insurer as a real party in interest.” Id. [315 Md.] at 147-48, 553 A.2d 707 .

In a footnote to that statement, the Collins Court said at 148 n. 5, 553 A.2d 707 : “The Thomas court applied District of Columbia law in holding that the insurer was a real party in interest. City Stores Co. v. Lerner Shops of District of Columbia, Inc., 410 F.2d 1010 (D.C.Cir.1969). It opined, however, that the same result would obtain in Maryland because of the requirements of Art. 75, § 3, Md. Code (1951). That statute specifically provided that a person having a claim by reason of subrogation was a real party in interest, and that joinder could be compelled upon petition by a defendant.

That statute was later repealed and replaced by Maryland Rule 203, and Rule 203 has now become Rule 2-201. Under ordinary circumstances, a person claiming pursuant to a subrogation interest continues to be a real party in interest. P. Niemeyer and L. Richards, Maryland Rules Commentary, 92. We need not here consider whether the legislature intended a different result by expressly granting the claimant the right to bring a third party action if the insurer did not do so within two months of the award of compensation.

Cf. City of Baltimore v. Moore, 209 Md. 516 , 121 A.2d 857 (1956); Stark v. Gripp, 150 Md. 655, 658-59 , 133 A. 338 (1926). We note, however, that the claimant’s right to maintain the third party action is not exclusive, for we have held that the insurer enjoys a right concurrent with that of the claimant to bring a third party action even after the two month statutory period has passed, and the insurer has an absolute right to intervene in a third party action brought by the claimant.” The question of compulsory joinder was not before the Court in Collins , and so there was no need for it even to mention, much less decide, that question. What gives us some pause is the fact that the Court (1) did mention the issue, (2) noted both the general rule that a subrogated insurer is a “real party in interest” and the Thomas Court’s opinion that the general rule would apply in this context ⁴⁷⁴ under Maryland law, (8) cited Stark v. Gripp in questioning whether, in enacting § 58, the Legislature intended a different result, but (4) failed to note Jefferson v. Ametek or to indicate whether Stark/Jefferson or Thomas stated the correct view.

If that is an indication that Stark , as confirmed briefly in Baltimore Transit Co. v. State, supra, 183 Md. at 678 , 89 A.2d 858 , and Jefferson do not control, then the issue is still an open one in Maryland. In an exercise of caution, we shall treat it as such. As we indicated, one can find conflicting decisions outside of Maryland, particularly in the Federal courts. Larson’s view of the general