What happens when an employer has a worker’s compensation lien, the injured employee then sues thetortfeasor in state court, but the case get removed to federal court on diversity grounds? Can the employer intervene? What if intervention would destroy the complete diversity requirement for federal court jurisdiction? Can the employer still recover on its’ lien?
What happens when an employer has a worker’s compensation lien, the injured employee then sues thetortfeasor in state court, but the case get removed to federal court on diversity grounds? Can the employer intervene? What if intervention would destroy the complete diversity requirement for federal court jurisdiction? Can the employer still recover on its’ lien?
Under O.C.G.A. § 34-9-11.1 an employer who pays worker’s compensation benefits can intervene as a matter of right in a lawsuit filed by the injured employee (plaintiff) against the alleged tortfeasor (defendant.)See Department of Admin. Servs. v. Brown, 219 App. 27, 464 S.E.2d 7 (1995). In a court, an employer would intervene as a plaintiff, but would play a limited role in the litigation so as not to violate the collateral source rule. See generally Sommers v. State Compensation Ins. Fund, 229 App. 352, 494 S.E.2d 82 (1997). This is not to say that as an intervenor the employer would always be entitled to reimbursement on its lien even if the employee recovered. If the employee successfully argues that he or she was not fully compensated for all incurred losses, the employer might still not recover under ’s “made whole doctrine.” See Mut. Ins. Co. v. Johnson, 244 App. 338, 340 (2000). None-the-less, in courts an employer has a chance of recovering on its’ lien under state law. But what happens if the employee sues the tortfeasor who then removes the case to federal court on diversity grounds? Is the employer still guaranteed a chance of recovery under substantive law or will federal procedure block the employer’s possibility of recovery?
Generally, when the jurisdictional basis for a claim is based on the diversity of the parties, the federal court should apply federal procedural law, but state substantive law. See Erie Railroad Co. v. Tompkins, 304 64 (1937). See also Boone v. Knight, et al., 131 F.R.D. 609, 610 (1990). Fed. R. Civ. P., Rule 24 provides the basis for intervention in a federal court action; however, when the jurisdictional basis for the federal case is based upon the diversity of the parties (the injured employee plaintiff and the alleged tortfeasor(s)), the intervening employer plaintiff must still comply with 28 U.S.C. § 1332 and 28 U.S.C. § 1367.
Under 28 U.S.C. § 1332 the opposing parties must be completely diverse and the amount in controversy must exceed $75,000. That is to say, all plaintiffs must be diverse from all defendants or the federal court no longer has a jurisdictional basis to preside over the matter (even assuming that the amount in controversy requirement is met). The intervention by a plaintiff who is not diverse from a defendant would undermine the complete diversity requirement which would divest the federal court of jurisdiction and require that the matter be remanded to the state court.
Prior to the codification of the common law concepts of “pendant” and “ancillary” jurisdiction as “supplemental jurisdiction” under 28 U.S.C. § 1367, a federal court could retain its jurisdictional basis for hearing a case even where all plaintiffs were not diverse from all defendants, when a party intervened as a matter of right. See Sweeney v. , 917 F.2d 1560 (11th Cir. 1990). Under the common law jurisdictional principle of “ancillary jurisdiction”, when a party intervened as a matter of right, a federal court could hear claims that had “. . . a logical relationship to the aggregate core of operative facts which constituted the main claim and over which a court has a basis for federal jurisdiction.” at 1565. See also Revere Copper & Brass, Inc. v. Aetna Casualty & Sur. Co., 426 F.2d 709, 714 (5th Cir. 1970). However, with the advent of “supplemental jurisdiction” under 28 U.S.C. § 1367 the basis for preserving federal jurisdiction in a diversity case, even where substantive law provided the basis for intervention as a matter of right, came to an end if complete diversity was not preserved.
Under 28 U.S.C. § 1367(b), a court can not exert supplemental jurisdiction over claims brought by aintervening plaintiff under Fed. R. Civ. P., Rule 24 where it would be inconsistent with the complete diversity requirement of 28 U.S.C. § 1332. However, if a federal court can exercise supplemental jurisdiction over the claims of an intervening plaintiff, without undermining the complete diversity requirement of 28 U.S.C. § 1332, then there remains a jurisdictional basis under 28 U.S.C. § 1367(b) for the claim to be heard in federal court.
Therefore, despite having a right to intervene as a plaintiff under state law, an employer intervening on a worker’s compensation lien in federal court, where it is a resident of the same state as the defendant tortfeasorhas limited options. The employer may: (1) persuade the federal court to allow intervention, thereby destroying diversity jurisdiction, and causing the case to be remanded to state court or (2) pursue independent state court remedies. Needless-to-say, the intersection of procedural and substantive law in this type of case can have a dramatic effect on an employer’s ability to collect on a worker’s compensation lien in federal court.